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H. V. & H. W. POOR, 




By H. V. & H. W. POOR. 

New York: J. J. Little & Co., Printers, 
1O to 2O Astor Place. 


THE object of the following pages is to present 
in a concise manner the irreconcilable distinction 
between currencies of banks and bankers of com- 
merce which are instruments arising out of pro- 
duction and trade ; which are essential to their oper- 
ations on a large scale ; which are limited by their 
extent ; which represent a corresponding amount 
of existing capital, and are discharged by its use, 
and which are most beneficent in their result : and 
those of Government notes, which do not arise 
out of production and trade ; which have no rela- 
tion to the extent of the latter ; which, instead of 
representing a corresponding amount of existing 
capital, represent its waste ; which do not disap- 
pear by their use ; and which, having the force of 
money by being legal tender, are necessarily highly 
maleficent in their result. The conclusions of the 
writer have been supported by illustrations drawn 
from the most memorable examples in history. 



His object is to appeal to the intelligence of every 
citizen in the land ; and will be accomplished if he 
can help to excite a wide discussion of the subject. 
He is confident that such discussion, conducted 
in a proper spirit, and by an adequate method, 
must lead to such uniformity of conviction of the 
disastrous effect of our legal-tender notes, that in 
place of any increase, the public will demand that 
steps be presently taken for their speedy and com- 
plete retirement. 




What is Paper Money ? . I 


Resumption of Specie Payments : Conferences between the 
Secretary of the Treasury and the Committees on Finance 
of the Senate and of Banking and Currency of the House 
of Representatives, March, 1878 16 


The Silver Question : A Sketch of Coinage in the United 

States, Great Britain, France and Germany Ill 


Legal Tender Currencies : Currency of the Mongols ; of the 
American Revolution ; of the French Revolution ; of the 
United States during the Rebellion, and of the " Confede- 
rate States" 138 

The Greenback Party 217 

Method of Resumption 233 

INDEX 243 





IN a recent work * I undertook to treat money 
as a subject coming within the range of the 
exact sciences. I now propose to apply the laws 
there unfolded to the various financial proposi- 
tions before the country for the resumption of 
specie payments, and especially to that of Mr. 
Secretary Sherman. 

Should a bank the American Exchange, for 
example cease upon a given day to make further 
issues of notes and credits, its whole capital, with 
such of its deposits as had been loaned, would, 
without action or effort on its part, be returned to 
it in coin (assuming it to be on a specie basis) 
within, say, ninety days, provided its bills were to 
mature within such period, and were paid. Its 

* " Money and its Laws," embracing a History of Monetary Theo- 
ries and a History of the Currencies of the United States, by Henry 
V. Poor. New York : H. V. & H. W. Poor, 68 Broadway. 1877. 
I I 


accumulations of coin would from day to day be 
in ratio as they were paid. Equally without ac- 
tion or effort on its part would all its liabilities be 
taken in. The process, which would simply be 
one of liquidation, would convert all, or nearly all, 
of its assets into coin. The following statement 
may be assumed to show approximately the con- 
dition of the bank, when it ceased to make further 
issues : 


Bills receivable $10,000,000 

Coin Reserves 3,500,000 

Real Estate. 

Due from other Banks 3,150,000 

Total $17,000,000 


Share Capital $5,000,000 

Deposits 10,500,000 

Note Circulation 500,000 

Balance (surplus).... 1,000,000 

Total $17,000,000 

The following statement would show approxi- 
mately its condition after its bills and other dues 
were fully paid : 

Assets. Liabilities. 

Coin in hand $16,150,000 

Real Estate 350,000 

Total $16,500,000 

Share Capital $5,000,000 

Deposits 10,500,000 

Balance (surplus) 1,000,000 

Total $16,500,000 

Should its deposits, or a portion of them, be 
drawn, its coin would be correspondingly reduced. 

The capital of the bank in the outset might have 
consisted wholly of coin, or of the notes and credits 
of other banks, or of bills receivable given for 


merchandise, a sufficient amount of coin in addition 
being held to serve as reserves. If its capital were 
paid in wholly in coin, the process of discount, till 
this was paid out, would consist of an actual ex- 
change of coin of capital, for the bills of its cus- 
tomers. When this was paid out (less an amount 
sufficient to serve as reserves), loans would be made 
by an issue of the notes and credits of the bank 
for bills given in the purchase of merchandise fit- 
ted, and in demand, for consumption. The greater 
part of loans at bank are made in this manner, the 
process of discount being ordinarily a mutual ex- 
change of obligations. The parties in whose favor 
the discounts are made pay out the notes and 
credits received, for labor and material to be used in 
the prosecution of their industries in the produc- 
tion of merchandise similar to that already put 
upon the market and for which the bills discounted 
were given. Those to whom the notes and credits 
are paid use them, as a rule, as money, for the 
purpose of reaching some 'one of the articles of 
merchandise held by the makers of the bills. 
They are received by the consumers of such mer- 
chandise equally with coin, for the reason that they 
are received by the holders in its sale equally with 
coin, these using such notes and credits in the pay- 
ment of their bills ; the bank in such payments 
making no distinction between its notes and credits 
and coin. No sooner, therefore, are its notes and 
credits issued than they immediately enter upon a 


circuit which is to bring them back to it, automat- 
ically, and in full volume. The time ordinarily 
consumed in making such circuit that is, for the 
distribution for consumption of the merchandise 
which the bills represent, averages, say, ninety 
days. Such, consequently, is the proper limit as 
to time of discountable paper, which should always 
mature before or simultaneously with the return 
of the notes and credits issued in its discount, in 
order that the one may be discharged by the other. 
If the notes and credits return previous to the 
maturity of the bills, the former have to be taken 
in by the bank by the payment of a corresponding 
amount of coin. So soon as the notes and credits 
return to the bank, they are functus officio, so far as 
relates to the transactions in which they were issued, 
and only appear when new ones are entered into. 

As the process of discount is a mutual ex- 
change of obligations, the process of payment is 
ordinarily their mutual cancellation. If the bills 
are paid, the notes and credits issued in their dis- 
count will, as a rule, be the instruments of such 
payment. So far as the latter are deposited in 
banks, these making no distinction between their 
own notes and those issued by others, they are 
daily presented for redemption through the oper- 
ations of clearing houses, the process being too 
familiar to require further description. Whatever, 
therefore, is issued, so soon as it has performed its 
function, returns regularly and necessarily to the 



issuer in one of the ways described. When not 
retired by direct payment into the bank, or by 
mutual offset at the clearing house, it must, for 
the want of merchandise, the ordinary subjects 
of consumption, be discharged in the universal 
equivalent in coin. No credit is ever given be- 
tween issuers of currency. Their issues are always 
assumed to be the equivalent of coin, and are treat- 
ed as such equivalent. The slightest evidence 
that they are not, as far as their constituent is 
concerned, is the signal for their instant presen- 
tation to the issuer for coin. The law, therefore, 
which compels the redemption of paper money of 
all kinds, so soon as it has performed its office and 
function, is an inexorable one. The best that an 
issuer can hope for is that his issues shall serve as 
money that is, remain for ninety days in the chan- 
nels of circulation. He has constantly to fear that 
they will not so remain, but will, be immediately 
presented for payment. In such case he is com- 
pelled to suspend, as no issuer of currency is able, 
as a rule, to take in all his liabilities upon the in- 
stant. Each one, therefore, is most scrupulous to 
maintain his credit, and is always eager to strength- 
en his position by drawing in coin all the balances 
that may be found in his favor. 

Such is a brief description of the money of banks 
of commerce. It is, through the bills discounted 
by its issue, the symbol of capital, of merchandise, 


and is discharged by its use. - Such merchandise 
may be in the hands of the public, or in- the vaults 
of the bank in the form of coin. So far as curren- 
cy is symbolic, a corresponding amount of capital, 
in the form of coin, is discharged from the work of 
distribution, reducing in like ratio the cost of such 
merchandise to the consumer, and increasing at the 
same time the profits of the producer ; each sharing 
alike in the saving effected. The very object of 
such symbols is to furnish convenient and inex- 
pensive, in the place of inconvenient and expen- 
sive, instruments of distribution. They belong to 
the class of mechanical contrivances, which by 
supplanting old and cumbrous processes by new 
and simple ones, have changed the whole face of 
modern society. The effect of such currencies 
is to reduce prices precisely as the application 
of steam to production reduces prices. The ten- 
dency of all commercial countries is to their use 
by the sale, on credit, of merchandise in gross, 
the bills given laying the foundation therefor. 
The means of distribution, and consequently, the 
money of the country, would be ideally perfect 
when every article entering into consumption was 
represented by a symbol by which it could be 
reached. Such a result, however, cannot be real- 
ized from the tendency always existing, and which 
can never be fully restrained to issue symbols 
without, a constituent. The best corrective of such 
an abuse is to forbid the discount of bills having 


more than ninety days to run, and to provide that 
no symbols shall be issued of denominations less 
than ten dollars. In England, where their use is 
carried to a greater extent than in any other coun- 
try, no notes of banks are issued of less denomina- 
tions than five pounds, or twenty-five dollars. 

It will be seen from what has preceded that the 
capital which is to retire a banking currency is or- 
dinarily merchandise in the hands of the public. 
The bank holding the bills given for it is entitled 
to their proceeds. As a rule, however, such pro- 
ceeds come into its possession only when it goes 
into liquidation. By the time its notes and credits 
ordinarily return to it, the merchandise represented 
by them has reappeared in new forms, represented 
by new bills, which are discounted in manner de- 
scribed ; the notes and credits issued serving for its 
distribution, the reserves being held as security 
for new transactions precisely as they were held 
for the old. In this way whatever is produced is 
distributed, coin interposing only when the notes 
. and credits do not represent their proper constitu- 
ent. As they will, whether they represent it or 
not, return regularly and automatically to the is- 
suer, they must, so far as they lack such constitu- 
ent, be paid in coin. This is held for the purpose 
of supplying the lack of such constituents, the or- 
dinary subjects of consumption. It is never intended 
to part with it, but to hold it as reserves against 
any sudden or unforeseen contingency. A proper 



proportion must always be maintained between re- 
serves and liabilities. If a bank with coin reserves 
equaling $1,000,000 may safely have notes and 
credits in circulation representing merchandise to 
the amount of $4,000,000, it must reduce its issues to 
$2,000,000, if from any cause its reserves are re- 
duced permanently to $500,000. It is no part of 
the office of a bank to lend coin, but to supply instru- 
ments of distribution in its place. It is weakened 
just in ratio as it parts with coin, and strong just in 
proportion as its liabilities are provided for without 
its use. A bank having liabilities of $10,000,000, 
with reserves in coin equaling $5,000,000, and with 
no other means of discharging its liabilities, would 
be immediately put into liquidation. The courts 
would interpose upon the mere suggestion of its 
condition. On the other hand, a bank with equal 
liabilities, with only $1,000,000 of reserves, but with 
$10,000,000 in good bills, would be entirely solvent 
and beyond the reach of legal interposition. All it 
would have to do to convert all its assets into coin, 
would be to call in its bills receivable, the amount 
of the latter equaling the excess of indebtedness to 
it on the part of the public. 

Such are the nature, object, use, and mode of 
retirement of bank money. It is simply the instru- 
ment by which capital is reached. Metallic-^-intrin- 
sic money, gold and silver, serves three great uses. 
It is the highest form of capital, and consequently 


is the instrument of reaching by direct exchange 
all other kinds of capital. As the desire for its 
possession is uniform from age to age, an attribute 
possessed in an equal degree by no other kind of 
property, it forms the reserves of society. When 
not wanted for exchange or reserves, it is used in 
the arts, such use constituting, in fact, the basis of 
its value. A bill of exchange drawn upon London 
may have the value of coin to a person owing debts 
in that city, for the reason that its conversion into 
money there will pay such debts. It is its capacity 
for such conversion that gives it its value. The is- 
sues of banks break up the bills drawn in the sale of 
merchandise in gross, into denominations suited to 
the convenience of the public. To those in want 
of such merchandise such issues serve all the pur- 
poses of coin. There will, however, always be hold- 
ers of them who may wish to convert them into 
coin for export, to serve as reserves, or for use in 
the arts. To such wants the issuers of currency 
must respond. So far as they are able to do this, 
their issues will have the value of coin to their 
holder, as they will enable him to reach the con- 
stituent in any form desired. It is such a provision 
that gives to the notes and credits of banks the 
value of coin. If not available for the purpose of 
reaching every kind of merchandise, they instantly 
fall to a discount from the price of coin. 

Let us see how far the paper money of govern- 


ments corresponds to the money of banks to the 
money of commerce. Should the United States, 
an issuer of notes to serve as currency, cease to 
make any issues for a period of three months, there 
would be returned to it within such period such 
portion of its notes as equaled the revenues col- 
lected say $60,000,000, or a little more than one- 
sixth of the notes at present outstanding, assuming 
all the revenues to be collected in them. By such 
return, the indebtedness of the public in the form 
of taxes would be discharged in an equal degree. 
A corresponding amount of the indebtedness of 
government would be taken in, but not an addi- 
tional dollar added to its means. Should it cease 
to make further issues for a period of one and a half 
years, its notes would (assuming the revenues to 
amount to $240,000,000 annually) be wholly taken 
in. In such event it would not be in the posses- 
sion of a dollar in coin, in consequence of its ceas- 
ing to be an issuer of currency. 

Such different results, following an action pre- 
cisely similar in the two cases, mark the wide dif- 
ference between the position of banks and the cur- 
rency they issue, and that of the government and 
the currency it issues. The notes of the former 
when properly issued are always the evidence of a 
capital which is to provide the means for their re- 
tirement. Such provision is the necessary condi- 
tion of their circulation. They are' payable on de- 
mand in order that their constituent may always 


be available to the holder. They circulate at the 
par of coin for the reason that their constituent 
has a value in coin equal to their nominal amount. 
For every note and credit issued, two parties at least 
the maker and indorser of the bill discounted 
undertake to save the issuer harmless on account 
thereof. Interest is always charged to their re- 
ceiver for such period as the bills discounted have 
to run, for the reason that they secure to him a 
corresponding amount of capital of the value of 
coin. They are never made competent to dis- 
charge the indebtedness of the issuer. Such pro- 
vision would be fatal to their circulation, as it 
would be considered as discharging him wholly 
from the obligation of payment. Their use largely 
increases the amount of coin in a country, from 
the powerful influence they exert in enlarging its 
production and trade ; the coin, and paper repre- 
senting merchandise of equal value, circulating side 
by side in proportions to suit the public conve- 
nience. The notes of a government, on the other 
hand, are never issued as the evidence of capital 
and as the instruments of its distribution, but al- 
ways to supply the lack of it to the issuer. It 
alone undertakes their retirement. They are never 
issued in the discount of bills. Interest is never 
charged to the parties to whom -they are paid, for 
the reason that they represent no immediately 
available constituent. The means for their retire- 
ment are. never provided previous to their issue. 


Government is never the lender, but always the 
borrower of capital. Its notes are never made pay- 
able presently, from its inability to pay them pres- 
ently. As they are always the last resort of ex- 
haustion and incompetency, they are always made 
legal tender in the discharge of contracts equally 
with coin as a necessary condition of getting them 
into circulation. Otherwise no one would receive 
them as money. Such provision may for a time 
give them a high value, but can never raise them 
to the value of coin, for the reason that they can 
serve only one function of coin the payment of 
debts. They cannot be exported as money, held as 
reserves, nor can they be used in the arts. They 
lose a considerable portion of their value so soon 
as the debts existing at the time of their issue are 
discharged, as no one will contract to receive them 
at a future day as the equivalent of coin. Their 
value, consequently, comes to depend upon the time 
that, in public opinion, is to elapse before they are 
paid. Having the same legal competency, they al- 
ways speedily drive the more valuable currencies out 
of circulation, as two currencies of unequal value 
will never circulate side by side. But such com- 
petency has force only so long as confidence is felt 
that the notes will eventually be redeemed. When 
it is seen that they will not, it will have no force 
or effect whatever. They always inflate prices for 
the- reason that, instead of being the symbols of 
capital, they are always instruments in excess of 


the means of consumption. They are promises to 
pay without provision for payment, and are neces- 
sarily subject to excessive fluctuations in price, due 
to the uncertainty as to the time of their payment, 
a matter wholly within the discretion of the issuer. 
As a banking currency, so far as it is symbolic, is 
wholly beneficent in its effects, discharging from use 
a corresponding amount of capital in the form of 
coin, and reducing in equal ratio the cost of distri- 
bution, a currency of government notes is wholly 
maleficent in its effects. It is, in whatever light 
viewed, a pure and unmitigated evil. The issues 
of banks are made the basis of industries which re- 
produce merchandise equal in amount at least to 
that consumed. The greater the amount, conse- 
quently, of bank-money properly issued, the greater 
both production and consumption. No matter 
what its amount, there can be no inflation, as the 
symbol never exceeds, and always disappears with, 
the constituent. A government currency, on the 
other hand, is always in inflation to its full extent. 
As -it becomes, being legal tender, the reserves of all 
other issuers, there is necessarily a vast increase of 
currency in addition to its amount. The imme- 
diate and necessary effect is an excess, in ratio 
to the inflation, of consumption over production. 
From the increased demand, vast commercial and 
industrial enterprises are presently set on foot, for 
the products of which there is no corresponding 
power on the part of the public to consume. The 


injurious effects begin to show themselves long 
before the currency has reached its maximum. The 
old loses a portion of its power, while the increas- 
ing wants of the public can no longer be supplied 
by new issues. Those who have embarked in in- 
dustrial enterprises, seduced by an apparent abun- 
dance of capital, are without demand for their 
products, or means to sustain the immense outlay 
they have made, or to which they are subject. As 
very large numbers, from being thrown out of em- 
ployment, are compelled to live upon their past 
accumulations, the money of the country gradually 
flows to the commercial centers, and into the hands 
of the wealthy few ; the 'great mass of consumers 
coming in time to be almost wholly wanting in 
means of support. The condition of the United 
States to-day is a striking illustration of the effect 
of the use of a currency which is neither capital nor 
the evidence of capital. There is a vast abundance 
of products of all kinds, but no demand for them, 
even at rates far below cost. All are sellers none 
buyers. Those who possess money do not dare, in 
the general uncertainty, to attempt to put it to 
any productive use, in the utter stagnation which 
prevails in all the departments of commerce and 

That which has preceded has only epitomized 
the results of experience common to the whole race 
from the moment that money has been used in any 


form. No banking or government currency was 
ever maintained at the value of coin unless full 
provision was made, or supposed to be made, for 
its conversion into coin or its equivalent. Money, 
like merchandise, is accepted only at its real or 
supposed value. Otherwise no distinction would 
be made between a half and the whole. Mankind in 
their transactions with each other deal in realities, 
not in fictions ; in substantial things, not in shadows. 
There never was a currency of government notes 
of the character of those of the United States that 
was not, from its very nature, at a discount from 
the par of coin. I am well aware that very different 
accounts of money are laid down in the books. In 
air it is confidently stated that the most worthless 
substances, by being declared by government to 
be money, may be maintained at the par of coin, 
provided their nominal amount does not exceed 
that of the coin supplanted by them ; and that 
such worthless substances, after they are declared 
money, may, by reducing their amount, be raised 
to any possible pitch of value. All such state- 
ments are the dreams of theorists or of schoolmen, 
and are without the least support in reason, or in 
the experience of mankind. 


IT is now proposed to raise the value of the gov- 
ernment notes of the United States to the par 
of coin. The provision necessary, in the opinion of 
Mr. Sherman, Secretary of the Treasury, was fully 
set forth by him in recent conferences with the 
Committee of the Senate on Finance, and the 
Committee of the House of Representatives on 
Banking and Currency. The conference with the 
Senate Committee was held on the ipth of March, 
1878. At this conference several interrogatories 
were proposed to the Secretary by members of the 
Committee which, and their answers, were, with 
some abbreviations, as follows : * 

THE CHAIRMAN. Ought the Resumption Act to be re- 
pealed, and if not, why not ? 

SECRETARY SHERMAN. The question is a very general 
and is rather a legislative than an executive question ; but I 

* The Committee on Finance of the Senate consists of Mr. Mor- 
rill of Vermont, Chairman ; Messrs. Dawes of Massachusetts, Ferry 
of Michigan, Jones of Nevada, Allison of Iowa, Bayard of Delaware, 
Kernan of New York, Wallace of Pennsylvania, and Voorhees of 



have no objections to answering. I think the Resumption 
Act ought not to be repealed, * * . * and now I am 
fully convinced that we are able to do what we have so often 
promised to do and ought to do. 

CHAIRMAN. Do you think resumption is practicable under 
the present law ? 

SECRETARY SHERMAN. The best evidence that we are 
able to resume on the ist of January next is the progress 
that has already been made. When the Resumption Act 
was passed, the premium on gold was about loj per cent. 
Since that time it has been reduced to a nominal rate. It is 
now a little over i. Since that time we have accumulated 
in preparation for resumption a large sum of gold. 1 have 
taken- some pains to get the figures, which I will give you-: 

Gold coin $117,151,455 62 

Gold bullion 7>937,3OO 1 1 

$125,088,755 73 

Less amount to credit of dis- 
bursing officers and outstand- 
ing checks , . 6,189,626 60 

Gold-certificates actually out- 
standing 44,498,500 oo 

Called bonds and interest 6,818,677 29 

Interest due and unpaid 4,909,705 21 

62,416,509 10 

Available gold coin and bullion 62,672,246 63 

Available silver coin, fractional 5,972,895 42 

Available silver bullion 35130,718 31 

Total available gold and silver $7ii775,86o 36 

* * * Now, in regard to another point pertinent 
to your question, we have, in the process of preparation 
for resumption, reduced the volume of United States notes. 


The precise figures are familiar to you. The amount was 
$382,0x30,00x3 at the time of the passage of the Resumption Act, 
and the amount now is $348,618,024. Again, the amount of 
outstanding bank-notes has been reduced. On December 
31, 1875, the amount was $346,479,756; on December 31, 
J877, $321,672,505, and on February 28, 1878, the amount of 
bank-notes outstanding was $321,989,991 ; but the amount of 
bank-notes of banks in existence, not in process of liquidation, 
was $299,240,475, and the difference between these two sums 
being the notes of banks in process of liquidation, although 
the notes are in circulation, yet an equal amount of green- 
backs are in the Treasury as a special deposit to redeem 

The decline in the price of gold, compared with 
government notes, may be due to causes which have 
no relation whatever to their relative value. The 
impression is now almost universal that the Nation is 
on the eve of resumption ; that time only is wanting 
to bring about the perfect coincidence of notes and 
gold. Did this conviction rest upon any well-assured 
foundation, a contract to pay gold, say at the end 
of one year, would, deducting the present premium, 
be as readily entered into as a contract to pay a 
corresponding amount of greenbacks. There is, 
however, no person of ordinary sense, were the 
two kinds of money offered him the gold at an in- 
terest of three per cent, and the greenbacks at six 
who would not elect to pay the higher rate, from the 
excessive losses which the gold loan might involve. 
This fact marks the wide distinction that still 
exists between the two. At one time greenbacks 



circulated at only a very small discount. At an- 
other they were at a discount of 65 per cent. At 
the present time they are at a discount of only i 
per cent, below the price of gold. Their relative 
value at the present time, as in the past, is simply 
a matter of opinion, of sentiment, which, as will be 
shown in the progress of the discussion, may be as 
wide of the mark as it has been at any previous time. 
A depreciation of the notes, and perhaps an exces- 
sive one, is certain to take place when the future 
discloses the entire inadequacy of the proposed pro- 
vision for resumption. The present price of green- 
backs does not depend upon the proposed provision 
for their payment, but upon a value to be derived 
from the uses, as currency, to which they may be 

CHAIRMAN. What effect has the silver bill had, or is likely 
to have upon resumption ? 

SECRETARY SHERMAN. I do not want to tread on delicate 
ground in answering that question, Mr. Chairman. I shall 
have to confess that I have been mistaken myself. Now, as 
to the silver bill, I have watched its operation very closely. 
I think the silver bill has had some adverse effects, and it has 
had some favorable effects, on the question of resumption. 
Perhaps the best way for me to proceed would be to state the 
adverse effects first. It has undoubtedly stopped refunding 
operations. Since the agitation of the silver question, I have 
not been able largely to sell bonds, although I have made 
every effort to do so. * * * Now, another adverse effect 
the silver bill has had is to stop the accumulation of coin. 
Since the 1st of January we have accumulated no coin, ex- 
cept for coin-certificates, and except the balance of revenue 


over expenditure. The revenues in coin being more than 
enough to pay the interest of the debt and coin liabilities, we 
accumulate some coin. 

Another effect that the silver bill has had is to cause the 
return of our bonds from Europe. Although the movement 
of our bonds in this direction has been pretty steady for more 
than a year, yet it is latterly largely increased ; how much I 
am not prepared to say. 

On the other hand, I will give the favorable effects. In the 
first place, the silver bill satisfied a strong public demand for 
bi-metallic money, and that demand is, no doubt, largely 
sectional. No doubt there is a difference of opinion between 
the West and South and the East on this subject, but the de- 
sire for remonetization of silver was almost universal. In a 
government like ours it is always good to obey the popular 
current, and that has been done, I think, by the passage of 
the silver bill. Resumption can be maintained more easily 
upon a double standard than upon a single standard. The 
bulky character of silver "would prevent payments in it, 
while gold, being more portable, tvoitld be more freely de- 
manded, and I think resumption can be maintained with a 
less amount of silver than of gold alone. 

SENATOR BAYARD. You are speaking of resumption upon 
the basis of silver, or of silver and gold ? 

SECRETARY SHERMAN. Yes, sir ; I think it can be main- 
tained better upon a bi-metallic, or alternative standard, than 
upon a single one, and with less accumulation of gold. In 
this way remonetization of silver would rather aid resump- 
tion. The bonds that have been returned from Europe have 
been readily absorbed remarkably so. The recent returns 
in New York show the amount of bonds absorbed in this 
country is at least a million and a quarter a day. We have 
sold scarcely any from the Treasury since that time. This 
shows the confidence of the people in our securities, and 
their rapid absorption will tend to check the European scare. 


SENATOR VOORHEES. That shows, Mr. Secretary, that this 
cry of alarm in New York was unfounded. Then, this capi- 
tal seeks our bonds "when this bi-metallic basis is declared ? 

SECRETARY SHERMAN. Yes; many circumstances favor this. 
The demand for bonds extends to the West and to the banks. 

SENATOR JONES. Then, in its effect upon the return ot the 
vast amount of bonds you refer to, would there not be an 
element of strength added in favor of resumption in that the 
interest on these bonds returned would not be a constant 
drain upon the country ? 


SENATOR JONES. Would the fact that they come back ena- 
ble us to maintain resumption much easier ? 

SECRETARY SHERMAN. Undoubtedly. * * * 

SENATOR BAYARD. You speak of resumption upon a bi- 
metallic basis being easier. Do you make that proposition 
irrespective of the readjustment of the relative values ' of the 
two metals as we have declared them ? 

SECRETARY SHERMAN. I think so. Our mere right to pay 
in silver would deter a great many people from presenting 
notes for redemption who would readily do so if they could 
get the lighter and more portable coin in exchange. Besides, 
gold coin' can be exported, while silver coin could not be 
exported, because its market value is less than its coin 

SENATOR BAYARD. I understand that it works practically 
very well. So long as the silver is less in value than the 
paper you will have no trouble in redeeming your paper. 
When a paper dollar is worth 98 cents nobody is going to 
take it to the Treasury and get 92 cents in silver ; but what 
are you to do as your silver coin is minted ? By the ist 
of July next or the ist of January next you have eighteen 
or twenty millions of silver dollars which are in circulation 
and payable for duties, and how long do you suppose this 
short supply of silver and your control of it by your coinage 


will keep it equivalent to gold when one is worth ten 
cents less than the other ? 

SECRETARY SHERMAN. Jiist so long as it can be used for 
anything that gold is used for. It will be worth in this 
country the par of gold ^lntil it becomes so abundant and 
bulky that people will become tired of carrying it about ; 
but in our country that can be avoided by depositing it for 
coin - certifica tes . 

The Secretary gives three injurious effects of the 
silver bill : the stoppage of the funding of the sixes 
into four per cents; the check in the accumulation 
of coin for resumption ; the return of bonds from Eu- 
rope. The first two effects resolve themselves into 
one, as both the refunding of the old bonds and 
the accumulation of coin depend wholly upon the 
sale of new bonds. With the progress of -the dis- 
cussion, however, all three injurious effects are 
shown to be highly advantageous, and to be power- 
ful aids to the act and maintenance of resumption ; 
for no sooner had the bi-metallic basis been de- 
clared, by means of which the value of all classes 
of bonds were, if the silver bill means anything, 
scaled down 10 per cent., than upon the strength 
of it there was a rush for bonds from the West, 
which championed and carried through the bi- 
metallic basis, as well as from the banks which so 
bitterly opposed it. In this increased demand 
both friends and foes of the silver bill vied with 
each other on common ground. The position of 
the country for resumption was strengthened, ac- 
cording to the Secretary, in ratio to the amount 


of bonds returned, from the reduced amount of in- 
terest to be remitted abroad. 

Having converted the injurious effects so much 
deprecated before the passage of the bill into real 
and substantial blessings, the Secretary proceeds 
to enlarge upon the advantages in reference to 
which there was no doubt or controversy. The 
silver bill was a " popular measure," and, to repeat 
him, " in a government like ours it is always good 
to obey the popular current." Whether good or 
not to obey the popular current depends on wheth- 
er its direction be good or bad. The President 
thought it wholly bad ; that the silver bill was cal- 
culated to indict a great injury upon the prosperity 
of the country ; that it was a fraud upon public 
creditors, a stain upon our national character ; and 
vetoed it in spite of its passage by more than two- 
thirds of both branches of Congress. Had the 
President possessed convictions at all proportioned 
to the importance of the subject, he and his Secre- 
tary would very speedily have parted company. 
One or the other is wholly wrong in a matter most 
deeply involving the moral and material welfare 
of the Nation. The Secretary's maxim, that the 
popular current is to be followed whichever way it 
flows, is the curse of all popular governments, and 
threatens to destroy our own. Had Washington 
acted upon it, our government would not have sur- 
vived the term of his office. Never did a public ser- 
vant more heroically breast the.popular current than 


when he ratified the Jay Treaty ; declared the abso- 
lute neutrality of the country in the wars growing 
out of the French Revolution; and put down, by 
main force, the Whisky Insurrection in Pennsylva- 
nia. In all these matters the popular current moved 
against him with a force of which we have but 
little idea. The public squares of the seat of gov- 
ernment at the time were lurid with the glare of the 
flames kindled to consume his effigy, as well as 
copies of a treaty, negotiated, it was claimed, in the 
interest of our hereditary enemy. Almost single- 
handed, he met the popular current with a calm- 
ness of conviction and sense of duty which over- 
came all resistance, and carried to triumphant con- 
clusions measures which are now acknowledged to 
be eminently wise, and upon whose success the 
very existence of the Nation may be said to have 
depended. His brightest laurels were won by the 
establishment of measures carried against the most 
determined opposition of a vast majority of the 
people. Twice was he unanimously elected to the 
Presidency. Opposition to the popular current be- 
came the real foundation of his unbounded popu- 
larity, as the result always vindicated the sound- 
ness of his judgment and the integrity of his 
purpose. Would that modern demagogues could 
see that pandering to the popular current is the 
surest way of incurring popular disdain and con- 
tempt ! The path that leads to the Presidential 
mansion is white with the bleached bones of aspir- 


ants whose only method of reaching it was to com- 
mit themselves to the fickle and treacherous cur- 
rent of popular favor. 

Resumption, according to the Secretary, can be 
had upon a bi-metallic basis with less amount of 
coin than on a gold basis, for the reason that the 
inconvenience in the use of silver as money will 
deter many people from demanding it ; while it 
could not be exported for the reason that its legal- 
tender value would be greater than its market or 
exportable value. When gold is demanded, there- 
fore, all he has to do is to crush the impertinent 
applicant beneath a vast mass of the more ponder- 
ous metal. Let us take an illustration. Mr. B , 

a New York banker, a " bloated bondholder," hav- 
ing occasion to remit a million dollars to Europe, 
walks into the Treasury with an air of importance, 
such as the possession of a round million would 
naturally give, and blandly asks the cash for his 
notes. The Secretary, with equal blandness, replies, 
" Yes, sir," touches his bell, when instantly appear 
some fifteen or twenty stalwart porters. " Roll out 

Mr. B two hundred kegs of silver." Mr. B 

starts back with an air of mingled astonishment and 
indignation: "But I want the gold for export. 
You stated in your conference with the Senate 
Committee that silver cannot be exported, for the 
reason that its market value is less than its legal- 
tender value ; while gold, whose actual and nom- 


inal value is the same, can be. If you pay me 
in silver, as I must make the remittance, I shall 
lose a hundred thousand dollars by the operation." 
"Ah!" replies the Secretary, with his upturned 
eye fixed on vacancy. " Yes, sir," exclaims Mr. 

B , " and I won't stand it ! " " Stop," says the 

Secretary, addressing the porters who had just be- 
gun to roll out the kegs; and, turning to the 
banker : " Mr. B , you do not seem quite pre- 
pared on your part. When I begin to pay you I 
want to make a clean job of it. Before I begin 
you must have in line about twenty drays a ton 
and a half for each is a fair, load. This will save 
trouble all round. Good morning, sir ! " 

So much for the advantages in aid of resumption 
of the bill to remonetize silver, due to the gravity 
of one of the metals to be used. The Secretary pro- 
poses to treat a demand for gold as Mark Twain's 
sporting character of Calaveras County did the 
notorious jumping frog of his rival weight him so 
with ponderous metal that, when the jump upon 
which an immense stake depended was to be made, 
he could not move a peg. "But," asks Senator 
Bayard, " how are you going to equalize the value 
of gold and silver when one is worth ten per cent, 
more than the other?" "The thing is done," says 
the facile Secretary, in effect, "so far as this coun- 
try is concerned : use silver for anything that gold 
can be used for, and the two metals will have the 
same value. For the foreign trade we care noth- 


ing, as for this we can, when gold is demanded, pay 
out silver. This will do till silver becomes too 
abundant and heavy to be lugged round. All we 
then "have to do, to equalize their value to any ex- 
tent, is to receive the silver on deposit, issuing cer- 
tificates therefor. The two metals will then have 
an equal value, no matter their amounts, for" the 
reason that a certificate of a deposit of ten thou- 
sand dollars of one metal will not weigh a whit 
more than a certificate of deposit of ten thousand 
dollars of the other." 

The Secretary, at the time Senator in Congress, 
drew, in 1873, the bill demonetizing silver, one of 
the alleged reasons for the measure being, that in 
consequence of a slight difference between the 
coined value of gold and silver, the latter had wholly 
ceased to be used except as subsidiary currency ; it 
having been exported at its bullion value, which was 
greater than its legal value, compared with gold. 
As it is now coined at a legal value 10 per cent, 
greater than its bullion, gold as a necessary conse- 
quence will be the metal exported, two currencies 
of equal legal and of unequal bullion value never 
circulating side by side. If he would resume and 
maintain resumption, it must be upon the basis of 
silver. Of this metal he had, all told, upon the 28th 
of February, 1878, $9,103,613. He must have, by 
his own showing,$ 1 20,000,000. He should, therefore, 
not only lose no time in converting his gold into sil- 



ver, but make all future sales of bonds payable in it. 
Resumption upon silver, however, would involve a 
delay of three years, in order that the Mint might 
have time to turn out its necessary amount of 

Such are the aids to resumption derived from the 
silver bill. 

SENATOR VOORHEES. How much surplus did you say you 
had on hand ? 

SECRETARY SHERMAN. I have now seventy-one millions. 

SENATOR VOORHEES. Then you say that you would be will- 
ing to undertake resumption under the existing laws by the 
1st of next January. Now, with the aid of the silver bill 
and the coinage, what amount of coin would you expect to 
have on hand, with which to undertake resumption at that 
time ? 

SECRETARY SHERMAN. I would accumulate about five mil- 
lions per month of both metals from the ist of April to the 
ist of January, which would be forty-five millions; and, if 
the market is favorable, I think I would try to make good the 
loss that I have suffered by not accumulating in January, 
February, and March of the present year. I think I could in 
this way accumulate fifty or sixty millions. 

SENATOR VOORHEES. That would give you one hundred 
and fifty millions. 

SECRETARY SHERMAN. Not so much ; nor do I think it is 
necessary to have so much. 

SENATOR JONES. And does that look to eliminating the 
legal-tender function on the ist of January next ? 

SECRETARY SHERMAN. No, I think not, sir; I am in favor 
of maintaining the legal-tender currency. 

SENATOR KERNAN. You thought that you could practi- 
cally redeem all that would be presented ? 


SECRETARY SHERMAN. I have no doubt of my power to 
reissue, up to three hundred millions of legal tenders. 

SENATOR JONES. I have an idea that would make a good 
deal of difference. 

SENATOR FERRY. Then, on the question of resumptio.n, 
your view is that, with ninety millions on hand, and the ac- 
cumulation of sixty millions more, or even forty millions 
which would be one hundred and thirty millions you would 
be willing to commence the resumption of the present volume 
of the currency, both national and bank ? 

SECRETARY SHERMAN. Oh yes. The banks must look out 
for themselves. 

SENATOR BAYARD. I would like to ask you if the condi- 
tion of the country will sustain this -resumption with this very 
large accumulation of gold by the banks in New York; and 
if they will not have a tendency to continue to increase their 
reserve, as they find the Treasury running in the same direc- 
tion ? 

SECRETARY SHERMAN. The national banks will take care 
of themselves. 

The Secretary has now $71,000,000 in the Treas- 
ury available for resumption. He proposes to ac- 
cumulate $5,000,000 a month more from the sale 
of bonds, so as to raise the amount under his own 
control to $120,000,000 by the 1st of January. He 
also holds in the Treasury some $60,000,000 of 
coin, represented in part by certificates of deposit, 
a part of it being held fojr the redemption of call 
bonds, and a part subject to the order of disbursing 
agents. A portion of these sums, perhaps ten or 
twenty million dollars, he hopes to make avail- 
able for resumption. So far as such deposits could 


be made available would his means be increased. 
The proposition to use a portion of them is the 
reason for the various amounts stated to be appli- 
cable to resumption, some of the Senators putting 
if as high as $140,000,000. As it would be utterly 
unsafe to rely upon deposits in the Treasury not 
belonging to the government, the amount to be 
counted upon as available for resumption can be 
only that belonging to it, and set apart especially 
for this purpose. 

It is plain that $120,000,000 will not pay $340,- 
000,000, the amount assumed to be outstanding 
on the 1st day of January next. The Secretary 
declares that it will not ; but that to anticipate 
his argument with the above provision the notes 
will not be presented for redemption from the 
confidence felt in their value. This assumption 
involves the whole question at issue. What is 
money? Gold and silver capital in its highest 
form for the reason that every one seeks to obtain 
them by parting with whatever he has to sell. We 
need not here discuss whether the universal desire 
for the precious metals be innate or conventional. 
It is certainly stronger than that felt for any other 
kind of property. Another kind of money is the 
issues of banks, the value of which is not intrinsic, 
but representative. Such value depends in a^ery 
small degree upon the coin the banks hold. It 
rests chiefly upon the merchandise represented by 
their bills. It has to those in want of such mer- 


chandise the value of gold, and is accepted in its 
place. Another kind of money is government notes. 
These possess.none of the attributes of bank money ; 
no specific sum is provided for their redemption. 
For want of such provision, they are necessarily at 
a discount from gold. They will remain at such dis- 
count until the same provisions are made in their 
favor as are necessary to sustain bank currencies 
at the par of gold. They may, of course, have 
a greater value than that of the present provision 
for their payment, from the expectation that full 
provision will at some time be made ; precisely as . 
the notes of a bank may have a greater value than 
the apparent provision in their favor, in coin or 
merchandise, from a right to proceed against the 
shareholders. But future provision, either on the 
part of government or of banks,- is not equivalent 
to a corresponding amount of capital in hand. 
The notes of both will remain at a discount till 
such full provision be made. Resumption on the 
part of the government can be nothing less than 
such provision. 

Another reason why the notes of a government 
issued as currency will always be at a discount 
from gold, is, that they are always instruments in 
excess of the means of consumption. Should the 
amount of gold in a country upon a specie basis be 
suddenly doubled, prices of all other kinds of mer- 
chandise would necessarily rise. The result would 
be the same should banks suddenly and largely in- 


crease their issues by discount of bills not the rep- 
resentatives of merchandise. The law is simply that 
of supply and demand, and is as inexorable as that 
of gravitation itself. The Secretary, therefore, in 
his attempt at resumption, is confronted at the 
very outset by obstacles which are as much beyond 
his power, as it is beyond his power to render an 
acute equal to a right angle, or to make one and 
one equal four. The question is not one of confi- 
dence, but of quantity. Bank-notes circulate from 
the confidence which exists that they represent 
the capital adequate to their payment. The confi- 
dence necessary to their circulation disappears the 
moment it is seen that they do not represent such 
capital. Where it exists, it is simply trust in the 
integrity of the issuer. But no confidence will ever 
exist that $50 will pay $100. This, however, is the 
kind of confidence on which the Secretary bases his 
great scheme of resumption. The moment, there- 
fore, that he attempts to resume with a provision 
of only $120,000,000, a run will immediately set in 
upon him, which will draw all his coin so soon as 
it can be counted out to eager and impatient note- 
holders. There will be plenty who will see, or 
fear, that resumption cannot be maintained ; that 
in view of failure, the Secretary will, as he threat- 
ens, resort, in self-defense, to his legal-tender notes. 
They would do their best to anticipate such action. 
They could lose nothing, but might gain every- 
thing, by the change. The legal-tender clause of 



the notes, instead of being an aid to resumption, 
would only serve to precipitate the rush for coin, 
for fear that nothing would be left to their hold- 
ers but payment in kind. Resumption, therefore, 
with the legal-tender clause preserved, is an impos- 

With a full provision of coin for his notes, the 
Secretary can no more maintain them in circula- 
tion than with the partial provision which he pro- 
poses. Three hundred and forty million dollars 
could not be accumulated without great disturbance 
in commercial circles. So soon as he began to pay, 
a large amount of his coin would necessarily return 
to its accustomed channels. Large sums would 
immediately be drawn by the banks to serve as 
reserves for issues equaling perhaps five times their 
amount. As the coin could be put to so much better 
use by banks than by the government, the whole 
of it, upon the plainest principles of economy, 
would be immediately drawn. In the latter case the 
ratio of currency to coin would be as one to one ; 
in the former, as five to one. If it be asked why 
would not the notes convertible into coin be held 
by the banks as the basis of their currency, instead 
of the coin itself, the reply is as obvious as it is 
conclusive ; it is that the notes of the government 
may always be made legal tender in payment of 
demands against itself, and are always liable to 
be resorted to for such purpose ; consequently, as it 
2* * 


costs no more to carry coin than the notes, the 
holders of these would always, as a matter of proper 
caution, draw the coin. From the very nature of 
things it is utterly impossible that a currency of 
coin should circulate alongside of a currency of 
legal-tender notes, no matter the present provision 
made for their payment. The right, both on the 
part of the government and the people, to avoid by 
their use the payment of coin, would always throw 
such a distrust over their value as to reduce it 
below that of coin, which in consequence would 
necessarily disappear from circulation. 

Government is undoubtedly capable, with a mod- 
erate amount of coin, of maintaining a convertible 
currency in circulation equal in quantity to that of 
its revenues accruing within, say, ninety days; such 
revenues bearing the same relation to its notes that 
the merchandise represented by the bills of a bank 
bears to its notes and credits. The larger part 
of such currency would come into the possession of 
those who had revenues to pay, and would be held 
for such purpose. A smaller portion of it would 
find its way into the hands of those who might wish 
to convert it into coin to be held as reserves, or 
for export, or for use in the arts. Should it provide 
a sufficient amount of coin to meet the calls upon it 
last described, the whole issue that is, an amourit 
equaling the immediately incoming revenues 
would be maintained at par, as the holders could 


avail themselves of the constituent in whatever 
form desired ; gold, so far as drawn, being the uni- 
versal equivalent. To such extent, and to such 
extent only, can a government maintain a converti- 
ble currency in circulation. 

SENATOR MORRILL. How can the policy of resumption be 
aided by Congress ? 

SECRETARY SHERMAN. I think that you can aid resump- 
tion very much if you will allow me to receive United States 
notes in payment of bonds. * * * 

SENATOR JONES. Let me see if I understand you. Is your 
idea this : that if you were permitted to sell four per cent., 
bonds for currency, it would raise the value of currency ? 


SENATOR JONES. And in that respect would aid you in re- 
sumption it would extinguish to a certain degree the pre- 
mium between gold and currency ? 


SENATOR FERRY. You would substantially recognize cur- 
rency, then, as equal to coin ? 

SECRETARY SHERMAN. I think it makes it so. 

SENATOR VOORHEES. Why could not the government re- 
ceive its customs duties in currency ? 

SECRETARY SHERMAN. I will answer that in a moment if 
you please. * * * 

SENATOR FERRY. The process is to retire the higher rate 
interest bond, and put out the lower rate bond ? 

SECRETARY SHERMAN. Yes, sir; the saving in the difference 
ofinterest in six months would cover the extra amount paid 
as difference between currency and coin. I think another 
aid to resumption is very desirable. If you could make it 
clear by legislative enactment that the Secretary has the 
power to reissue United States notes after the ist of January, 


to the amount of $300,000,000, that would relieve the people, 
and relieve the whole country, from the fear which they have 
that the greenback currency is to be entirely destroyed. If we 
are to attempt, on the ist of January, to pay off all these 
greenbacks as presented and to destroy them, I have my 
doubts of our ability. I think the law is perfectly clear now 
as to the power to reissue up to three hundred millions cur- 
rency. * * * Another thing I would recommend, and 
this is in answer to Mr. Voorhees. I would, on the ist of 
October next, receive United States notes in payment for 
duties, and yet provide for the interest on bonds in coin in 
other words, I would assume on the ist of October next that 
our notes were as good as gold and silver, and would receive 
them as such. 

SENATOR MORRILL. Can you do that in the face of the 
solemn pledge on the statute-book. 

SECRETARY SHERMAN. Yes.* * * * If the note is the 
practical equivalent of coin it will be received as coin for 
interest, and we should take it as coin for duties. * * * 

SENATOR BAYARD. What becomes of your law of 1862 ? 

SECRETARY SHERMAN. It does not abrogate it. 

SENATOR BAYARD. I think that declared that the duties 
should be made payable in coin, and they were specially 
pledged to this end. 

SECRETARY SHERMAN. I know; but we pay the interest in 

SENATOR BAYARD. I know you pay the interest, but the 
underlying idea, to a certain class, has been to pay these 
duties in Treasury notes. If these were not redeemable, to 
do this would be a violation of that solemn pledge. * * * 

SECRETARY SHERMAN. I want to state to Mr. Bayard 
that we are receiving customs now in-a form of paper money. 
Our duties, nearly all of them, are paid in certificates of 
money ; we pay out these certificates, and we pay but coin. 

SENATOR BAYARD. The certificates actually represent gold, 



otherwise there would be a breach of contract. Instead of 
taking gold, we take certificates of deposit. 

SECRETARY SHERMAN. We receive greenbacks in the same 
way as gold certificates, payable after three months after the 
ist of October next. 

SENATOR BAYARD. I understand that is so, and I agree 
with you that whenever a greenback is equivalent to a cer- 
tificate of deposit for gold, then it is a mere convertibility of 

SECRETARY SHERMAN. That is precisely what I would 
make it. 

(The Secretary here read a letter from Mr. Gilfillan, Treas- 
urer of the United States, in which he stated that the interest 
on the registered 5, 4^, and 4 per cents, are now paid in coin 
checks ; and that the principal and interest on the called 
Konds were paid 'by coin checks, the past year to the amount 
of $127,124,450.) 

SENATOR FERRY. The Secretary stands upon the presump- 
tion assured by these facts, that on the ist of January there 
is no question that he can on the volume now out resume, 
and as respects the greenbacks, it is simply a difference of 
form between them and certificates of coin, and, therefore, 
he says he would be ready on the 1st of October to receive 
the greenbacks in payment of duties, because he has or will 
have coin enough to meet maturing interest and resume. 

SECRETARY SHERMAN. I never would receive the green- 
back for customs duties until I knew it was as good as coin, 
and I would be willing to run the risk of anticipating that for 
three months if that would help the matter. 

Having shown how two metals, widely differing 
in value, may be made equal, by receiving them 
indifferently in the operations of the government, 


the Secretary craves the privilege of raising, by a 
similar device, the notes of the government to the 
par of gold. To recognize them as equal to gold, 
he tells us, " makes them so." Armed with such 
power, he would anticipate by three months the 
appointed time of resumption. He would violate 
no law or pledge of the government by collecting 
and paying the interest accruing on the bonds in 
notes, as under the new regime there would be no 
difference between notes and gold. Already, he 
says, has this difference between paper and gold 
disappeared in some of the most important opera- 
tions of government. The greater part of the duties 
are collected and the interest and principal of the 
public debt are now paid, not in coin, but in paper, 
the holders preferring it to coin. " You see," he ex- 
claims triumphantly, " the equality of paper with 
coin already established : why not allow me to raise 
the notes as well as the coin-certificates of the gov- 
ernment to the par of gold by using each equally 
in payment for bonds and for customs ? " Mr. 
Bayard, rising to the spirit of the occasion, exclaims, 
" I understand that is so ! And I agree with you 
that whenever a greenback is equivalent to a certifi- 
cate of deposit for gold, then it is a mere converti- 
bility of terms ! " Mr. Ferry, equally pertinent and 
profound, and who, had he been the first to speak, 
might have been equally original, followed : " As 
respects the greenbacks, it is simply a difference 
of form between them and certificates of coin ! " 



All seemed equally to recognize that they stood at 
last in the full blaze of the financial millennium ; 
that the hard and cruel distinction between the 
value of gold, wrought out of the earth at such infi- 
nite cost and toil, and an equal nominal amount of 
paper, the cheapest of human products, was forever 
done away. It was no longer a conference for de- 
liberation, but a love-feast to celebrate final and full 
fruition. It is hard to disturb the childlike confi- 
dence and serenity with which the gravest prob- 
lems were so quickly disposed of ; but if the Secre- 
tary would make certificates of deposit and the 
legal-tender notes of the government like in result, 
is it not necessary for him to make them like in 
kind ? A certificate of deposit represents a corre- 
sponding amount of gold especially set apart for its 
payment, and is payable on demand. It is purely 
commercial paper. The legal-tender note does not 
represent a corresponding amount of gold set apart 
for its payment, nor is it payable on demand. To 
make it payable on demand ; to make it a certificate 
of deposit, a piece of commercial paper, involves the 
provision of gold equal to its amount. Is it safe to 
assume that a legal-tender note for $1,000, payable 
at the pleasure of the government, and for which 
provision has been made equaling only one-third 
its nominal amount, will have a market value equal 
to that of a certificate for a like amount, payable 
on demand, and for which full provision in gold 
has been made ? If not, then the whole resump- 


tion fabric of the Secretary falls hopelessly to the 

SENATOR KERNAN. About how much silver should there be 
in the country to have a fair supply of coin to pay all the 
duties ? 

SECRETARY SHERMAN. That is a doubtful question. If the 
coin is convertible into coin-certificates, I think $10,000,000 
or $20,000,000 will do it. 

SENATOR KERNAN. If there were $20,000,000 in coin-certifi- 
cates in existence, they would probably pay the duties, would 
they not ? 


The fact that $20,000,000 of silver on deposit will 
suffice for the payment of all the customs duties 
certainly simplifies the situation, by showing how 
small is the amount of this metal required for so 
vast a service. That so little will be required shows 
the value of the Secretary's happy contrivance, by 
which, by means of certificates of deposit, all excess 
in the country over the $20,000,000 required for 
the duties, may be maintained at the par of gold. 

SENATOR ALLISON. In the event of a change in the balance 
of trade, so that our imports shall exceed our exports, begin- 
ning, say July ist, and continuing to the end of the year, what 
probable effect would that have upon your ability to resume ? 
or have you any machinery by which you can counteract any 
such influence that might happen temporarily during this in- 
terval ? 

SECRETARY SHERMAN. If the current of trade should be 
against us, it is pretty difficult to answer. If we had power 
to raise the rate of interest, we might check it. I do not 


know that the government would be much affected by the 
balance of trade, and I think we could go on. It would un- 
doubtedly be harder upon the people. 

THE CHAIRMAN. Suppose there should or should not be a 
European war ; would either have any effect? 

SECRETARY SHERMAN. All such circumstances would 
have an effect upon merchants. 

The Secretary has certainly the advantage of 
merchants in case of an adverse state of the foreign 
trade. These must pay in gold, in the currency of 
the nation by means of which all our payments to 
other countries are made. If a run b made upon 
him, all he has to do is to intrench himself behind 
a barricade of silver, which he declares to be not 
exportable for the reason -that its domestic legal- 
tender value is greater than its exportable value ; 
or should from any cause the silver defense be car- 
ried, all he has to do is to retire within the inner 
and more formidable citadel of greenbacks, and 
from such fastness hurl defiance at his pursuers. 
Such arts, so proper to the government of a great 
nation, do not become merchants, who must pay in 
gold or break. 

THE CHAIRMAN. Don't you believe there will an expansion 
come upon us naturally or by action of the Treasury Depart- 
ment on the ist of January? Will there not be more money 
in actual circulation after that period ? 

SECRETARY SHERMAN. I think and hope so. 

SENATOR FERRY. Would not that produce a healthier con- 
dition ? 



We can only reply: 

" Happy is your grace 

That can translate the stubbornness of fortune 
Into so quiet and so sweet a style." 

SENATOR KERNAN. And your opinion is that authority to 
reissue the legal-tender notes should be expressly given by 

SECRETARY SHERMAN. I think that authority to reissue, 
unquestioned and undoubted, would take away the fears of all 
classes of people : First, those in favor of inflation, who do 
not want the greenback destroyed ; then, in the Eastern 
States, where they think we ought to retire the greenbacks 
and issue bank-notes instead, and believe that we are bound 
under existing law to pay the whole of the $300,000,000. 
And that we are not prepared to do. 

SENATOR ALLISON. In other words, you think we cannot 
come to and maintain specie payments without the power to 
reissue ? 

SECRETARY SHERMAN. I do not think we can. 

The conference with the Senate Committee here 

We now leave the august presence of the Senate 
for the freer and more invigorating air of the 
House. No sooner had the Committee on Banking 
and Currency,* the one of that body to which are 

* This committee consists of Mr. Buckner of Missouri, Chairman; 
Messrs. Evving of Ohio, Hardenberg of New Jersey, Yeates of 
North Carolina, Hartzell of Illinois, Bell of Georgia, Hart of 
New York, Eames of Rhode Island, Chittenden of New York, 
fort of Illinois, and Phillips of Kansas. 



especially confided the monetary interests of the 
nation, heard of the interview with the Senate 
Committee, than they earnestly appealed to the 
Secretary that he would appear before them, and 
unfold afresh this wondrous gospel of salvation by 
faith in the material as well as in the spiritual world. 
Promptly responding to the call, he appeared before 
the House Committee on the 1st of April, 1878. As 
one session did not suffice for all the matters to be 
considered, a second was held on the following 4th 
of April. A communication had been previously 
addressed by the chairman of the committee to 
the Secretary, covering the points to which his 
attention was to be mainly directed. The first re- 
quest was for a statement showing the amount of 
coin in the Treasury on the 28th of the preceding 
March, where located, and what deductions were 
to be made from it on account of actually existing 
demands against it. The Secretary replied that 
the amount equaled $134,920,080, of which $118,- 
351,709 was in gold coin, $7,937,300 in gold bullion, 
$5,675,494 in subsidiary silver coin, and $2,955,577 
in silver bullion the amount differing -only slightly 
from that held on the 28th of the preceding Febru- 
ary. In answer to the inquiry as to the amount of 
gold and silver coin and bullion in the Treasury, 
from 1865 to 1877, the Secretary professed his 
inability to reply, but stated the amount available 
for resumption, on the first day of February, 1877, 
to equal $11,936,771, and on the first day of Feb- 


ruary, 1878, to equal $71,775,860, as already shown 
in his interview with the Senate Committee ; the 
amount accumulated during the year equaling 
$59,839,089. In answer to the inquiry as to the 
amount of bonds sold up to February 1st, 1878, 
and not paid for, the Secretary replied that no 
bonds had been sold that were not paid for ; that 
the amount of bonds sold under the Resumption 
Act had been as follows: 

5 per cent Bonds of 1881 $17,494,350 

4i " " " "1891... 15,000,000 

4 " " " " 1907 25,000,000 


The amount of bonds issued on account of re- 
funding was stated as follows : 

5 per cent Bonds of 1881 $490,000,000 

4i " " " " 1891 185,000,000 

4 " " " " 1907 55,000,000 

Total $730,000,000 

Adding the amount of bonds sold on account of 
resumption, a total aggregate would be $787,494,- 


In answer to the fourth inquiry, as to the usual 
annual amount of coin and liabilities of the govern- 
ment, the Secretary replied by giving the amount 
paid the last fiscal year : 


Coin interest $92,883,431 

Amount applied to sinking fund 447,500 

Amount paid diplomatic service 755,286 

Amount paid foreign naval service 2,224,124 

Amount of customs refunded 5,247,801 

Amount for refunding national debt, etc 901,927 

Total $102,460,069 

In answer to the fifth inquiry, as to the amount 
of fractional currency redeemed and carried to the 
account of the sinking fund, the Secretary replied 
that the amount so redeemed and carried in 1876 
equaled $7,062,142; in 1877, $14,043,458; and in 
the present fiscal year, $3,382,621 making a total 
of $24,488,221. 

The sixth inquiry related to the balances of the 
sinking fund, the answer to which is omitted as not 
pertinent to the main subject of the present in- 
quiry the means provided for and the conditions 
necessary to resumption. 

After the preceding questions had been disposed 
of, the discussion took a wider range, Mr. Chitten-. 
den, one of the committee, leading the way by 
proposing to the Secretary the following inquiries : 

First. With silver dollars and silver-certificates full legal 
tender for all debts, including the customs and the public 
debt, is not gold practically demonetized ? and how will you 
renew your supplies or prevent its exclusive use as merchan- 
dise in foreign commerce ? 

Second. Is there no danger that the national banks, in tak- 
ing care of themselves, will hoard greenbacks enough to ex- 


haust your gold reserves when the day for resumption 
comes ? 

Third. Is it not probable that, before you have coined 
100,000,000 of the new silver dollars, with greater activity in 
foreign trade, they will be exported at their bullion value -to 
settle trade balances, and with what effect upon the price of 
silver bullion ? 

Fourth. Does not your success in resuming coin payments 
with our so-called double standard, depend absolutely upon 
an advance in the price of silver bullion in London to about 
59 pence sterling per ounce ? 

SECRETARY SHERMAN. I believe we can maintain at par 
in gold a certain amount of silver dollars ; precisely what 
amount I would not like to say, because that is a question of 
opinion. But I have the idea that we can maintain at par 
in gold no less than $50,000,000 ; perhaps more say from 
$50,000,000 to $100,000,000 ; but whenever those silver dol- 
lars become so abundant and so burdensome that the people 
would not have them and would not take them, and that they 
would not circulate, then undoubtedly they would gradually 
sink to the value of the bullion in them. * * * Upon the 
second point : It may as well be understood that the national 
banks cannot throw upon the government the burden of re- 
deeming their notes. The attempt would be suicide. They 
are bound to redeem their notes on demand at the Treasury 
with United States notes or coin, and to maintain in their 
vaults very large reserves of United States notes. Any effort 
of theirs to force the redemption of their reserves of United 
States notes in coin would at once cause the government to 
withdraw all government deposits from them, to present all 
bank-notes held or received by the government for redemp- 
tion, and, if need be, to exchange United States notes for 

Such a struggle as these gentlemen contemplate would 



end in their losing their power to issue circulating notes at 
all. Their talk about forming a line to break the govern- 
ment is not discreet, and is not dangerous. I am more con- 
cerned about what you will do than about what they will do. 
The United States Government already holds a larger cash 
reserve for the redemption of its notes in proportion to demand 
liabilities than any bank represented by these gentlemen, 
and it has power to increase it. * * * With a coin reserve 
of $100,000,000 to $150,000,000 the redemption of $300,000,- 
ooo of United States notes would be easy, and that reserve 
could not be diminished to any considerable extent by the 
banks, or any combination of banks, without a continuous 
draft upon the banks to make it good. We can rely upon 
the intelligent self-interest of the banks to prevent such a 
struggle. Nothing could provoke it more quickly than 
threats by bank officers, and if such a struggle comes, the 
government, with its reserve, with ample revenue, and the 
power to sell bonds, can easily maintain resumption, without 
fear of a line of bank cashiers anxious to break the Treasury 
or to force high rates of interest. 

On the last point : The power to reissue is plainly given 
by Section 3579, Revised Statutes, and is not cut off any more 
by the notes coming into the Treasury in exchange for coin 
than in payment of a tax. Even if the Supreme Court hold 
them as no longer a full legal tender, they are as much so as a 
bank-note. If the choice must be made between the two, the 
common interest would decide in favor of the United States 
note. I believe both ought to circulate and both be at par 
with coin. But nothing is so discouraging in the progress of 
resumption as for national banks to shrink from their share 
of the burden, or to make threats such as are stated by some 
of these gentlemen; and nothing is so injurious to the bank- 
ing system, or will precipitate its overthrow more certainly, 
than a popular conviction that the banks are endeavoring to 
embarrass the government in maintaining resumption. 


MR. CHITTENDEN. I did not hear anything on the part of 
those gentlemen with whom we conversed at the Sub-Treas- 
ury in the form of a threat, and I appeal to Mr. Ewing to 
confirm my impression. There was nothing of that kind in- 
tended, I am sure. These gentlemen simply expressed the 
opinion that in an attempt to resume with any stock of gold 
that you were likely to have, the gold would be transferred to 
the banks naturally. 

MR. EWING. That was it. 

MR. CHITTENDEN. There was nothing like a threat ? 

MR. EWING. No ; on the contrary, there was a great de- 
sire manifested on the part of the bankers to make resump- 
tion safe. 

SECRETARY SHERMAN. I have written propositions from 
these gentlemen, and from Mr. Coe himself, that if I will 
give them 44 per cent, bonds instead of 4 per cents, they will 
guarantee resumption. * * * Now, in regard to the reserve 
that is necessary, there is a difference of opinion. I would like 
to have so strong a reserve that there would be no question of 
our ability to resume, and I think (as I stated to the Commit- 
tee on Finance of the Senate) that if I can have a reserve of 
one hundred and thirty millions, or, in other words, if I can 
increase my present reserve about fifty millions, I do not see 
how it is possible to prevent us from resuming. If it were 
known to-day that it was certain, I should have such a re- 
serve by the 1st of January, and if it were certain that Con- 
gress would be willing to stand by the experiment of resump- 
tion, we would have resumption at once. 

MR. EWING. Neither of which can be made certain. 

SECRETARY SHERMAN. Yes ; if I could sell the bonds and 
get the reserve, the thing would be made certain in 24 Rours. 

The reply to Mr. Chittenden's first question that 
upon the issue of $50,000,000 of legal-tender silver 
dollars, their value would sink to 'that of the bul- 



lion they contain, conclusively shows that resump- 
tion cannot be had upon the basis of gold, this 
metal being certain to be speedily driven out of the 
country by the cheaper currency of silver. The 
Secretary will not have to wait till $50,000,000 be 
issued ; the distinction will show itself broadly 
enough with $10,000,000. The notes of the gov- 
ernment are speedily to be made receivable in the 
revenues, so that silver will not be required for 
this purpose. It will derive, therefore, no value 
from any accidental necessity for its use. Its 
value here will be its value in the London market ; 
its exchangeable value compared with gold will, 
unless the Secretary possesses creative power, be 
its bullion value. The Secretary might as well as- 
sume that the price of cotton in this country could, 
for domestic purposes, be maintained at 20 cents a 
pound, although its value in the Liverpool market 
equaled only 10 cents a pound, as to assume that 
the price of silver when made full legal tender for 
domestic use, could be make greater than its ex- 
portable value. If he would resume upon a metal- 
lic basis at all, the first step for him to take would 
be, as already remarked, to convert, with all possible 
speed, his gold into silver; but this in the end 
would accomplish nothing, as his greenbacks would 
speedily fall to a discount in reference to silver, as 
promises to pay capital at a future day can never 
equal capital in hand. He would have the same 
difference between silver and his notes as now ex- 


ists between gold and his notes. The impossible 
problem of making a part equal to a whole would 
still confront him. 

The Secretary asserts that " The banks cannot 
throw upon government the burden of redeeming 
their notes ; the attempt would be suicide." The 
banks, so far as combination is concerned, will 
attempt nothing of the kind. The government 
notes will be presented for payment in obedience 
to a far higher law than any that the banks can 
enact. There was never a contract made by our 
government for payment that was not presented 
for payment according to its tenor. Its creditors 
will no more release it from its obligations than will 
those of banks from their obligations. If it issues 
bonds, it must contract to pay, and must pay them 
as they fall due. If it issues notes as money, it 
must take these in as they fall due (that is, when 
such notes, like those of banks, have performed their 
circuit as currency). The moment it undertakes to 
resume, its notes will obey the laws of all convertible 
currencies. It will, like all issuers, have to enact its 
proper role. The banks becoming possessed of its 
notes will demand payment. Such of their notes 
as come into its possession will be demanded for 
payment. The balance resulting, after mutual off- 
set, must be paid in coin. If the Secretary under- 
takes to resume on a provision of $120,000,000 of 
coin, and if he pays gold, he will find that there 


will be far greater haste than method in the pres- 
entation of his notes. The results will be precisely 
the same as if a bank of issue should attempt to 
resume with available assets equaling only one- 
third its liabilities. The presentation of his notes 
will simply be a struggle for precedence. It will 
not make the least difference, so far as the govern- 
ment is concerned, whether the banks are active or 
entirely passive. They owe their depositors over 
$600,000,000, all of which, upon resumption, is pay- 
able in coin. The largest of these depositors are mer- 
chants and bankers engaged in foreign trade, whose 
transactions must all be made upon the basis of gold. 
They are not going to wait the effect of an adverse 
turn of the exchanges before taking any steps to 
meet it. They will not delay an instant in putting 
all their cash assets, whether of government or of 
bank issues, into gold into that which can be 
used in their operations at the same value in 
every country in the world. Their deposits exceed 
the whole provision to be made by the Secretary 
for resumption. They will take timely warning from 
his statement before the Senate Committee that 
government could not be injured by an adverse 
state of the foreign trade, the reason being that if 
gold was demanded in great quantities, it could 
pay silver ; and if silver was demanded in great 
quantities, it would pay nothing. 

Even should the Supreme Court decide the gov- 


ernment notes to be no longer full legal tender, 
they would, the Secretary tells us, " be as much so 
as bank-notes. If the choice must be made be- 
tween the two, common interests would decide in 
favor of the United States notes." Let us see : 
When upon a specie basis, every borrower at bank 
contracts to pay his note at its full face in coin. 
He does so for the reason that the notes he re- 
ceives secure to him an equal value with coin. In 
other words, the means for the retirement of such 
notes are provided previous to their issue. How 
with those of the government? The provision for 
their immediate conversion into coin equals only 
one-third their nominal amount. Ordinarily the 
notes of banks are at the par of coin. They sus- 
pended in 1837, and remained in suspension for 
about a year. In 1858 they again suspended for a 
few weeks ; the notes of those of the cities of New 
York and Boston never being at a discount of more 
than one-half of I per cent. If they were not or- 
dinarily payable in coin, no one would receive 
them, for every one contracting to receive them 
obligates himself to pay a corresponding amount of 
coin. The public may be well trusted in the mat- 
ter of securing a corresponding equivalent for their 
engagements. The normal condition of all bank- 
ing currencies is an equality with coin. What gov- 
ernment notes would be without the legal-tender 
clause was well set out by the Secretary in a speech 
delivered in the Senate of the United States, on 



the 1 3th of February, 1862, in support of the first 
legal-tender bill. 

" If you strike out this tender clause, you do it with the 
knowledge that these notes will fall dead upon the money 
market of the world ; that they will be refused, as they are 
now refused by the banks ; that they will be a subordinate, 
disgraced currency that will not pass from hand to hand ; 
that they will have no legal sanction ; that any man, whether 
a Jew broker or any other of the numerous kinds of brokers 
described by the Senator from Massachusetts, may decline to 
receive them, and thus discredit the operations of the govern- 
ment. I ask again, if that is just to the men to whom you 
have contracted to pay debts ? When you issue your demand 
notes, and announce your purpose not to pay any more gold 
and silver coin, you then tender to those who have furnished 
you provisions and services this paper money. What could 
they do ? They cannot pay their debts with it ; they cannot 
support their families with it without a depreciation. The 
whole, then, depends upon the promise of the government to 
pay at some time not fixed on the face of the note. It is, 
then, an era of irredeemable, depreciated paper money." * 

Such is government money without the legal- 
tender clause. The Secretary was speaking from 
facts staring him in the face. In 1861, upon the 
issue of bonds to carry on the War of the Rebellion, 
permission was given to the Secretary of the 
Treasury to issue what were called demand notes 
(not legal tender) to the amount of $50,000,000, the 
Secretary undertaking to maintain them at par by 

* Congressional Globe, Part 1st, 2d Session, 37th Congress, p. 789. 


redeeming such as were presented in coin. When 
the banks were broken he could no longer redeem. 
His notes fell to a discount considerably below that 
of bank-notes, although they were receivable in the 
payment of customs duties equally with coin, while 
bank-notes were not so received. To raise the value 
of the government notes, the amount outstanding 
at the time being $33,400,000, they were made by a 
special act legal tender in all contracts. In this 
way the value was brought up to that of bank- 
notes, for which they were to serve as reserves. 

Why should the banks combine to break the 
government ? Are they not the holders of $400,- 
000,000 of its bonds, and $100,000,000 of its legal- 
tender notes? Is there any way in which their 
interests could be so advanced as by an increase 
in the value of such an enormous mass of securi- 
ties? Is there any class in the community that 
have given such guarantees for an earnest and 
efficient support of the government ? Is there a 
class in the community so much interested .in 
resumption as the necessary condition of maintain- 
ing the value of their assets? In the struggle with 
the banks, which the Secretary sees to be impend- 
ing, his importance will be that of the fly on the 
coach-wheel. All his notes, on an average, come 
into the possession of the banks within periods of 
ninety days. Within such time, if he were on 
a specie basis, all would be presented for coin. 


Within such time he might perhaps come into 
possession of, say, $30,000,000 of the notes of the 
banks. In case of a run upon each other, the 
banks could present ten dollars to his one. As to 
reserves, he has nothing else, while the banks can 
take in every dollar of their liabilities without 
touching their reserves. He cannot get in a dollar 
without reducing his in equal ratio. 

The Secretary proposes to resume on the amount 
of notes, $347,848,712, outstanding April 1st, 1878, 
less the amount retired by the operations of the 
Resumption Law. This provided for the can- 
cellation of notes equaling 80 per cent, of the 
amount of new banking currency issued. The 
amount of notes so retired equaled, in 1875, 
$10,231,124; in 1876, $5,773,792; in 1877, $16,1 1 1,- 
308; and for five months of 1878, $3,100,466. At 
the rate of reduction so far, for 1878, the amount 
of notes outstanding October 1st will be $344,248,- 
712 ; and on January ist, 1879, $342,388,712. The 
latter is the probable amount on which resump- 
tion is to take place, and the amount upon which 
the Secretary would undertake to resume in twenty- 
four hours, provided he.could sell, for gold, $50,000,- 
ooo of bonds. This sale has been made, so that he 
is, on his part, fully prepared to resume on the 
amount of the outstanding notes. Hence the bill, 
subsequently introduced, with his approbation, for 
receiving the notes in payment of the customs 
duties. - 


MR. EAMES. I desire to present to the committee, in the 
presence of the Secretary of the Treasury, a consideration 
which, I think, is important in determining the question 
whether the government can resume or not in January, 1879. 
There is now outstanding about three hundred and forty- 
seven millions of greenbacks and three hundred and sixteen 
millions of national-bank notes, amounting together to some 
six hundred and sixty millions of paper currency. That is 
now used for the purpose of the business transactions of the 
country. The point to which I wish to direct the attention 
of the committee and of the Secretary of the Treasury is, 
whether the three hundred millions of legal tenders are not 
absolutely requisite for the business purposes of the country, 
and whether, therefore, there will be any very great desire 
to exchange them for gold. 

SECRETARY SHERMAN. I do not think we have a great excess 
of currency now. These bankers say that there is not enough 
of currency. So long as there is a want of confidence in our 
ability to resume, it is likely that the greenbacks will be pre- 
sented for redemption to some extent ; but if we were so 
strong that the public mind was satisfied of our ability to re- 
sume, there would be no motive to present notes for redemp- 
tion (especially when they may be redeemed in silver). Then, 
I agree' that these notes will not be presented. * * * I 
am inclined to think that we can maintain the present volume 
of circulation six hundred millions but that is a larger 
paper circulation than was ever maintained by any other 
country. That is a question for tl;e banks to decide for them- 
selves. * * * 

Why did not Mr. Eames ask, and the Secretary 
state, the amount of bills of exchange required for 
use in the commerce of the country, assuming a fixed 
and definite amount to be necessary? The proper 
answer would have been, an amount necessary to 



represent the merchandise passing to and from 
other countries. One should equal the other. 
Where there was no constituent, there should be 
no bills. So with a domestic currency. It should 
equal, or rather should never exceed, the merchan- 
dise fitted for consumption. The proper rule for its 
issue being established, the amount will take care 
of itself. The danger is that there will always be 
too much, instead of too little, currency in a coun- 
try. Every dollar of government notes is too 
much, as it has no constituent but debt ; and debt 
without interest can never be raised to the par of 

MR. EWING. You certainly cannot assume that, because 
you have had that accumulation of coin in the Treasury here- 
tofore when there was no redemption of legal-tender notes, 
you will continue to have it after redemption begins ? 

SECRETARY SHERMAN. I think we can assume if, when gold 
was not in circulation, there was a gold balance in the Treas- 
ury subject to demand without much variation, that, when all 
transactions are based on coin or paper redeemable in coin, 
this coin will remain in the Treasury. I believe that one of 
the first effects of resumption will be to increase the deposit 
of coin in the Treasury, because paper will be so much more 
convenient in all the transactions of life that paper will be 
used and the coin will be deposited with us. The Sub-treas- 
ury in New York will be, like the Bank of England, the place 
of deposit for all the coin of the country ; and coin-certifi- 
cates or greenbacks will be used for all current transactions, 
leaving the coin only to be drawn to meet the demands of 
foreign trade or the mutations and changes of supply and de- 


THE CHAIRMAN. That would depend entirely upon the 
balance of trade ? 


THE CHAIRMAN. That would be the key to the situation? 


MR. PHILLIPS. You state that we have coin interest to pay 
to the amount of ninety millions a year. Do you think it 
would be safe to undertake resumption with that burden 
resting upon us ? 

SECRETARY SHERMAN. Clearly. If we have the power to 
reissue legal-tender notes at par, and the power to sell bonds, 
if necessary, we can undoubtedly keep the notes at par. Re- 
demption would not go far before legal-tender notes would 
become scarce. I have stated that there were $70,000,0x30 of 
those legal-tender notes in our vaults, and there are also 
$70,000,000 of them in the custody of the national banks, 
whose interest it would be to keep them in their vaults. 

MR. PHILLIPS. Would it not be more to their interest to 
have the coin ? 

SECRETARY SHERMAN. These legal-tender notes are scat- 
tered all over the country. * * * 

MR. PHILLIPS. The interest of the banks to get the gold 
might prompt them to send in these greenbacks for redemp- 

SECRETARY SHERMAN. If you ask me whether 347 millions 
of legal-tender notes can be all paid with a hundred millions 
of coin, if they are all presented on the same day, I will say 
no; but, with 600 millions of currency, you cannot purchase 
all the wheat and corn in the country in the same day. 

MR. PHILLIPS. Will not the mere act of resumption create 
a demand for gold which does not now exist ? 

SECRETARY SHERMAN. On the contrary, I think it will di- 
minish the demand for gold. What would they want gold 

MR. PHILLIPS. These banks may wish to resume. 



SECRETRY SHERMAN. They would rather resume in green- 
backs. They deposit their gold with us for safe-keeping. 

MR. FORT. Would there not be a temptation for the banks 
to exchange their greenbacks for gold ? 

SECRETARY SHERMAN. I do not see what object they would 
have in doing it. 

MR. FORT. They would do it merely for the premium. 

SECRETARY SHERMAN. But there would not be any pre- 


* * 

MR. EWING. It strikes me that the addition of seventeen or 
eighteen millions, drawn from these four items, is not safe in 
calculating the resources for resumption. 

SECRETARY SHERMAN. I think that if you ask any banker 
in New York how much of that fund is available for resump- 
tion purposes, he will put it higher than I do. 

MR. EWING. As a banker ? 

SECRETARY SHERMAN. As long as we are issuing United 
States notes, redeemable on demand, we are in the banking 

MR. EWING. And take the bankers' chances ? 

SECRETARY SHERMAN. We do it as a matter of course. 
We save the interest, and have to do as bankers do. 

The Secretary assumes that, as a certain amount 
of coin remained in the Treasury, represented dur- 
ing suspension of payments by certificates, a far 
greater amount will remain in it after resumption, 
the government notes being a more convenient 
currency. Suppose he were to issue certificates 
similar to those now used to the extent of $340,- 
000,000 upon a deposit of $120,000,000, making 
them legal tender to be paid' out by him to suit 
his convenience or necessities, upon demand for, 
and in place of coin. Would they circulate at 


the par of coin ? Instead of this, would not only 
deposits cease to be made, but would not every 
holder seek, if possible, to draw the coin ? Gold 
is now deposited in the Treasury as a matter of 
convenience in the payment of duties; payments in 
such case being little more than a matter of book- 
keeping. It is hardly possible that government 
should not receive its certificates of deposits in pay- 
ment of the revenues. So long as it is believed 
that they will be so received, coin may continue 
to be deposited. The certificates are assumed to 
represent specific sums which cannot be appropri- 
ated to any purpose but their payment. It will be 
wholly different with the gold held for the green- 
backs : these are not certificates of deposits of coin 
especially set apart for their redemption, and which 
the government can apply to no other use. Why 
upon resumption should any considerable amount 
of coin be deposited with the government ? What 
would be received in exchange? Greenbacks 
having a provision for payment equaling one-third 
their nominal amount. Would not the holders of 
coin take it to banks which, by using it as a reserve, 
could discount the bills of those taking it to them 
to an amount five times greater than that of the 
gold deposited? The Secretary wholly miscon- 
ceives the function of gold in relation to a cur- 
rency. It is not, nor will it ever be, the basis of a 
currency. Its use is to supplement such basis 
merchandise precisely as the reserves of a drawer 


of bills are held to take in such as may not be paid, 
or to meet any reclamation on account of a deficit 
of that against which the bills were drawn. If coin 
were to be loaned, the thing itself would be loaned, 
instead of resorting to the expensive and cumbrous 
process of issuing notes against it. Whatever the 
amount of gold in the country not required in the 
arts, or by way of change, or as reserves for indi- 
viduals, this will always be held by banks and bank- 
ers in support of their issues. All not required for 
the purposes named will be exported. Government 
is not a discounter of paper. It has no occasion 
to hold a dollar ; nor can it hold a dollar, in addi- 
tion to that required in the discharge of its ordi- 
nary and proper duties, that can be drawn. Any 
accumulation it might make would only serve as 
the source of supply for those who could put it to 
its proper use, for which government has no function 

The statement that upon resumption the public 
Treasury is to become the depository of the coin 
of the nation is too absurd to be mischievous. A 
statement of a much graver character, from having 
unfortunately a semblance of truth, is that the gov- 
ernment of the United States is in the " banking 
business ! " enacting a role which no other govern- 
ment ever yet attempted, and which, it is to be 
hoped, after our experience, no other government 
ever will attempt. What is a banker? One who 


receives on deposit the money of others, allowing 
usually a moderate rate of interest, and reloaning 
it at a higher rate, the difference being his profit. 
What has the government to loan ? Nothing. 
What does it propose to loan ? Nothing. It issues 
its notes, which are neither capital nor the repre- 
sentative of capital. It receives no interest on 
-them, for the reason that they do not secure to 
their holder an equal nominal amount of capital. 
If any other " banker" should attempt a like role, 
he would be hooted out of the country as an im- 
postor and fraud. What if all of our bankers con- 
ducted their operations in a similar manner? 
Would not all our interests be speedily involved in 
utter confusion and ruin? Are not the depression 
in business and the financial and commercial dis- 
asters of the past five years in great measure due 
to the entrance into the field of affairs of this new 
banker, colossal in his proportions, whose capital 
is debt created some sixteen years ago to supply 
the waste of war, the evidences of such debt being 
made the basis of the whole financial system of the 
nation ? That the Secretary's statement that this 
new banker is not only to remain in business, but 
is to become the centre of the financial and mone- 
tary operations of the country, should not have 
challenged a word of opposition or criticism, on 
the part of either of the two most important com- 
mittees of Congress, but, on the contrary, should 
be received with expressions of entire approbation 


and assent, shows how little understood is the 
mighty problem now agitating the country, and 
to what a desperate pass the nation has fallen. 

MR. EWING. That $45,000,000, assumed to be held by the 
national banks, and whatever amount you have in the Treas- 
ury belonging to the United States applicable to resumption, 
represents the whole preparation for the redemption of the 
$647,000,000 of paper money ? * * * 

SECRETARY SHERMAN. The banks do not have to redeem 
any notes in gold ; they redeem in United States notes. 

MR. EWING. After all, the problem is to float $647,000,000 
of paper money redeemable in coin. 


MR. EWING. Now, is not the drain upon the government 
practically the same to the extent of the aggregate of the 
greenback circulation ($348,000,000), as though the entire cir- 
culation were money ? 

SECRETARY SHERMAN. I say no, emphatically ; and all 
experience in other systems of banks would also say no. 
The truth is, the Government of the United States has 
nothing to do with the banks any more than it has to do 
with the other corporations and merchants of the country. 
The banks are as separate and distinct corporations as they 
can possibly be made. The United States has got to re- 
deem $348,000,000 of legal-tender notes, or to make them at 
par with coin. You recollect what I said before, that we 
have seventy millions undisputed money in coin. 

MR. EWING. I beg leave to say that I regard the statement 
as incorrect. 

SECRETARY SHERMAN. I say no ; you have no confidence. 

MR. EWING. I have met very few who have confidence. 

SECRETARY SHERMAN. I say that if you strengthen this 
reserve from seventy millions to from one hundred and twen- 
ty millions to one hundred and fifty millions, with power in 


the Secretary of the Treasury to sell bonds if necessary, and 
with power to reissue greenbacks, there is no danger of 
breaking the government. I do not think that anybody 
desires that. 

MR. EwiNG. My question was this : Whether the General 
Government, to the extent of its whole paper circulation out- 
standing, must not respond to the demands of the holders of 
the $647,000,000 of paper currency for conversion into coin ? 

SECRETARY SHERMAN. The government is bound to re- 
spond, to the extent of the amount of United States notes 
outstanding, but not one step farther. 

MR. EWING. Of course not. 

SECRETARY SHERMAN. Very well. That is only $300,000,000. 
It is just as it Great Britain was behind that $300,000,000 of 
bank-notes a separate and distinct power. We are under 
no obligation to redeem the national-bank notes. * * * 

MR. EwiNG. Suppose that through lack of confidence in 
your ability to maintain resumption, with the small accumu- 
lation of gold that you can obtain, there should be a demand 
for fifty millions of coin in any one month in New York. 

SECRETARY SHERMAN. It is scarcely a supposable proposi- 
tion that you put to me that they could gather together in one 
mass an amount of legal-tender notes to break the Treasury 
if this reserve is anything like what I say. * * * The 
idea of accumulating $75,000,000 or $100,000,000 of United 
States notes and carrying them to the Treasury in the course 
of a month is practically impossible. The commencement of 
such a scheme as that would make legal -tender notes so 
scarce that it would be impossible to get them, and the very 
scarcity would increase their value so that they would be 
equal to coin. 

MR. EWING. They could very readily present at least their 
coin-certificates for redemption. 

SECRETARY SHERMAN. Where are they ? Scattered all 
over the country. The whole amount of money, including 


currency certificates in the city of New York, which is the 
great commercial deposit of the country, is only twenty mil- 
lion dollars, and they never get more than that. That is the 
amount of the aggregate. If they gathered every note and 
every certificate in all the national banks of New York, they 
would not amount to twenty millions of dollars ; and is it to be 
supposed that they would do that ? Unless you maintain that 
we require to have as much gold on hand as there is paper 
money outstanding before we can have resumption, I do not 
see any difficulty about it. 

The idea of the Secretary in the preceding para- 
graphs, if any idea can be gained from them, seems 
to be this: If government be strong enough to in- 
spire confidence, none of its notes will be demanded 
in coin not one dollar in a hundred, as will be 
seen farther on. If upon a demand for a million, 
he can reply with "Sir, you can have fifty mil- 
lions ! " such assurance of strength, he assumes, 
will put to shame and drive from his presence, 
and before a dollar be drawn, every disturber of 
his and the public quiet. So long, he claims, 
as confidence is maintained, no one will draw, or 
wish to draw, a dollar of coin, from the greater con- 
venience of notes, and from their being so scattered 
up and down the country that it will be almost 
impossible to get together any considerable sum ; 
and from the fact that as soon as a small quantity 
is drawn, they will become more valuable from 
their scarcity than gold. In reply to all this it 
has been sufficiently shown that all paper money, 
whosoever the issuer, will be drawn in the ordinary 


course of business, say within ninety days, for the 
sake of reaching its constituent. If issued against 
merchandise, the ordinary subjects of consumption, 
this will be presently taken for consumption. If 
issued against coin, this will be presently drawn to 
be applied, as capital, to its proper uses to be 
exported, to be used in the arts, or held as reserves 
by corporate or private issuers of currency. Gov- 
ernment cannot ordinarily put it to such uses as 
these, at least with the same advantage as the 
public. It is not in trade ; it is not engaged in the 
production of merchandise ; it cannot discount bills 
drawn against such merchandise, holding its coin 
in reserves for issues equaling say five times its 
amount. Should it attempt to compete in the 
issue of currency, providing a proper basis there- 
for, it would be speedily and ignominiously driven 
from the field. It might just as well hope to com- 
pete in the cultivation of crops for sale, or in the 
production of merchandise, as to attempt to do so 
in the proper and legitimate use of the precious 
metals, so far as relates to the issue of paper 
money or to production and trade. 

As banks must resume with the government, what 
amount of reserve must they hold to resume with 
safety? Ordinarily, that is in periods of quiet and 
prosperity, the proportion of coin reserves to liabil- 
ities, deposits as well as notes, equals in this coun- 
try one-fifth, or twenty per cent. Upon resumption, 


after suspension, the proportion of reserves is always 
to be largely increased to meet extraordinary calls 
to which the banks may be exposed. Their liabil- 
ities are all due on demand. The greater part of 
their means is in their bills receivable, payable at a 
fut ure day. Their issues, or a portion of them, 
from apprehension excited by the remembrance of 
past disasters, or distrust in the present soundness 
of the community, or of the solvency of any con- 
siderable portion of the makers of the bills dis- 
counted, are liable to be immediately presented for 
coin. Upon resumption, therefore, reserves con- 
siderably exceeding the average have to be accu- 
mulated and maintained till the general solvency 
is established and confidence fully restored. The 
Bank of England, when it resumed in 1821, held 
11,233,000 against 26,051,000 of notes and de- 
posits, the proportion of reserves to liabilities be- 
ing 43 per cent. Upon final resumption in 1843 
after the suspension of 1837, the banks of the 
United States held $33,515,806 of coin against 
$114,732,226 of notes and deposits, the proportion 
of coin to liabilities being about 29 per cent. When 
they resumed after the suspension of 1857, they 
held $104,537,818 of coin against $341,140,693 of 
notes and deposits, the proportion of the former to 
the latter being the same as in 1843. The n tes 
and deposits of the national and State banks at 
the present time equal $1,250,000,000. To resume, 
therefore, with any degree of safety, they must hold 


coin reserves equaling fully $300,000,000. From 
what source is this vast sum to be supplied ? They 
now hold, including certificates of deposits, say 
$50,000,000. The Secretary proposes to accumulate 
in addition, say $125,00.0,000, the two sums equal- 
ing $i 75,000,000. Assuming the whole amount of his 
provision to be available, there will still be a deficit 
of $125,000,000. Where is this to come from? But 
the accumulations of government are by no means 
to be counted upon by the banks, as in case of a heavy 
run upon it, "the government, as the Secretary de- 
clares, would suspend. There is no coin in the coun- 
try outside the banks and the Treasury. Resump- 
tion, therefore, upon his programme, either by the 
government or by the banks is an impossibility. 
The government cannot resume without full pro- 
vision for its notes ; the banks cannot, without a pro- 
vision in coin, or of government notes, to serve as 
their reserves, of at least $300,000,000. To at- 
tempt such a. step upon the provision to be made is 
simply to court defeat and disaster. The Secretary 
cannot imagine why the banks should want to 
draw his coin, for the reason that he appears to 
have no conception of the nature and laws of a sym- 
bolic currency. He regards money, whether of coin 
or paper, as only a scale of valuation, an instrument 
for determining the relative price of the subjects 
of exchange ; forgetting that when intrinsic it is 
always one of the subjects of exchange ; and when 
symbolic, that which it represents must, when the 



symbol is used, become a subject of exchange; 
the symbol always disappearing by the use of the 
constituent. He will find, when he attempts to 
resume, that he is no longer in the land of dreams 
and shadows, but of stern realities ; that every note 
which he issues, will, in the ordinary course of 
business, speedily return to him for payment ; and 
that a graceful genuflection, or courteous wave of 
the hand, will not, as he now assumes, be accepted 
as the equivalent for $340,000,000 of solid gold. 

" The Government of the United States," says 
the Secretary, " has nothing to do with the banks, 
any more than it has to do with other corporations 
and merchants of the country." The exact opposite 
is the fact ; it has to do with them as it has with no 
other corporations or merchants of the country. 
The government is an issuer of currency ; the banks 
are issuers of currency based on that of the govern- 
ment. Its notes are by law their reserves where- 
with to discharge their obligations. The banks 
must upon resumption pay in coin, as well as in the 
notes of the government, their deposits as well as 
their own notes, They are required to hold a cer- 
tain amount of government notes as reserves against 
their deposits. For the whole amount of the liabili- 
ties of the banks, the government, if called upon, 
must supply the coin. The two form one system 
inseparably connected. If the Secretary would re- 
sume, he must carry the banks upon his own 
shoulders ; that is, he must, by virtue of issuing 


their legal-tender reserves, provide whatever coin 
they may need in their operations. But the gov- 
ernment must hold reserves as well as the banks. 
Its reserves must equal the whole amount of its 
liabilities, as it has nothing but its reserves for 
the discharge of its notes. The banks hold, in 
addition to their reserves, ample means for the 
discharge of all their liabilities. The govern- 
ment, consequently, instead of being able to help 
the banks to the extent of a single dollar, must 
provide for itself an amount of coin equal to its 
outstanding notes. Should it do this, and could 
the banks draw it, they could resume, and main- 
tain resumption ; but resumption by them would 
retire every note of the government. In fact, re- 
sumption by banks is possible only by the com- 
plete abandonment of the field by the government 
as an issuer of currency. 

MR. EWING. The Bank of England has on hand in gold 
coin and bullion $120,000,000, and in the banking department 
$59,000,000 of notes. 

SECRETARY SHERMAN. According to that the Bank of 
England has got $179,000,000 with which to pay $266,000,000. 
The total amount of demand liabilities on us is $407,000,000, 
and the total amount of coin and currency on hand $208,000,- 
ooo. Add to that such an additional reserve as I propose to 
accumulate of $50,000,000, and it would make it $258,000,000 
to meet $407,000,000, which is just about the proportion, ac- 
cording to the figures you give me, of $179,000,000 held by 
the Bank of England to meet its liabilities of $266,000,000. 
The disparity is not so great. * * * 


MR. EwiNG. Will the reissue of legal-tender notes help you 
to maintain resumption ? 

SECRETARY SHERMAN. Yes ; to have the power to reissue 
them ; for if the greenbacks can be retained at par, and we 
can reissue them, it will save us from issuing bonds. We 
would only reissue greenbacks in exchange for coin or its 
equivalent. We would reissue them in payment of coin in- 
terest, but, as a matter of course, we could not reissue them 
unless they were equal to coin, just .as the Bank of England 
would not issue a single note unless it was worth gold. We 
go on the supposition that the legal tenders are on par with 
gold. * * * 

MR. EWING. You would reissue them for the purpose of 
increasing your coin supply ? 

SECRETARY SHERMAN. Yes, sir ; practically. The public 
would be very willing to take the greenbacks if they were at 
par with coin, and as a matter of course they would be sub- 
stitutes for coin. 

MR. EwiNG. Did I understand you to say that a demand 
for half of twenty-five million pounds sterling on the Bank of 
England would break the bank ? 

SECRETARY SHERMAN. I do not know how much the re- 
serve of the Bank of England is now, but the Bank of Eng- 
land, like all banks, owes vast amounts of demand liabilities 
besides their notes. It holds the deposits of England. Every 
banking house in England almost has an account in the 
Bank of England ; and, therefore, the danger which threatens 
the Bank of England would be the calling in of the deposits, 
and if notes to the amount of ten million pounds sterling 
were presented, in addition to the call of depositors, there 
would be such a draft upon the resources of the bank, that 
the bank would have to suspend. But the advantage of our 
government now is that we have no demand liabilities not 
covered by actual money on hand. * * * Take the demand 
liabilities upon the United States and add them all together, 


and then take all the money that we have got in the Treasury, 
and, I repeat, we are in a better condition than the Bank of 
England is. 

The Treasury of the United States, says the 
Secretary, is stronger than the Bank of England, for 
the reason that the former has no liabilities not 
covered by actual money in hand. The demand 
liabilities of the Bank of England are its whole in- 
debtedness its notes and deposits. Those of the 
Treasury are its certificates of deposit of a corre- 
sponding amount of gold and appropriated balances, 
liable at any moment to be drawn. All these are 
covered by cash in hand. The legal-tender notes 
are not demand liabilities. They are payable only 
at the pleasure of the issuer. In this view, the 
Treasury is stronger than the Bank, as the latter 
must cash all its liabilities as presented or break. 
Its notes are not legal tender in the payment of its 
own indebtedness. But is the superior strength of 
the Treasury, resulting from the fact that its notes 
are not demand liabilities, likely to help the Secre- 
tary to maintain the notes at the par of coin ? 

In proof of the superior strength of the Treasury 
over the Bank, the Secretary offered the following 
tables illustrative of the condition of the latter, as it 
was on the 28th of February, 1878: 


Notes issued .38,698,020 


Government debt ^11,015,100 

Other securities 3,984,900 

Gold coin and bullion 23,698,020 





Proprietors' capital ^ 1 4>553>o 

Rest 3,414,161 

Public deposits, including 
Exchequer, savings banks, 
commissioners of national 

debts and dividend ac- 

counts 6,524,776 

Other deposits 21,529,721 

Seven-day and other bills. 255,619 

Government securities.... 15,203,201 

Other securities 17,672,338 

Notes 12,368,965 

Gold and silver coin 1,032,773 



Dated February 28, 18 

F. MAY, 

Chief Cashier. 

The above bank accounts would, if made out in the old form, present the follow- 
ing results : 

Liabilities. Assets. 

Circulation (including bank 

post-bills) ^26,584,674 

Public deposits 6,524,776 

Private deposits 21,529,721 


Securities 33,322,539 

Gold and bullion 24,730,793 


The balance of assets above liabilities being 3,414,161, as stated in the above 
account under the head " Rest." 

Now, continued the Secretary, in regard to the United 
States, I have a statement here showing the apparent and 
probable condition of the United States Treasury on April i, 
1878, and on the ist of January next. The only difference in 
these statements is that I add to the present condition of the 
Treasury the proposed accumulation of fifty millions of coin, 
and a substantial payment before that of the fractional cur- 
rency. I think it will be practically redeemed before that 
time. The actual results show the amount of demand liabili- 
ties on April i, 1878, against the United States as $460,527,- 
374, and they show the demand resources, including coin and 
currency, at $174,324,459, making the percentage of resources 
to liabilities 38. To show the probable condition of the 


Treasury on the ist of January, 1879, I a ^ tne fifty millions 
of coin and I take off the fractional currency, and deduct es- 
timated United States notes lost and destroyed, leaving the 
other items about the same. That would show an aggregate 
of probable liabilities of $435,098,400, and probable cash re- 
sources of $224,324,459, making 51 per cent, of the demand 
liabilities. The ratio of the Bank of England, at this time, is 
45 per cent. 
Statement showing the apparent and probable condition of the United 

States Treasury, including the proposed accumulation of $50,- 

000,000 coin. 



Demand liabilities, 
Legal-tender notes 

April, 1878. 
57,883,400 oo 
4,121,146 77 
8,439,391 04 
25,215,000 oo 
16,950,115 62 
62,342 50 

7,267 03 

January, 1879. 
$340,000,000 oo 
57,883,400 oo 
4,000,000 oo 
8,000,000 oo 
25,215,000 oo 


Interest overdue 


Fractional currency 
Demand notes 

Unclaimed Pacific Railroad interest 


$460,527,374 96 

$435,098,400 oo 

Demand resources, 


SisS.ssr.SoS 14 

35.966,851 35 


$188,357,608 14 
35,966,851 35 



$174,324,459 49 

$224,324,459 49 

Percentage of resources to liabilities. . . 



It will be seen from the statement of the condi- 
tion of the Bank of England, that while it has coin 
reserves equaling 45 per cent, of all its liabilities, 
it has available securities in bills receivable, the 
greater part of them speedily to fall due, far ex- 
ceeding all its liabilities. To have all the latter 


taken in, it has only to cease discounting for a 
period of sixty days. It will then not only be 
free from debt, but have a large amount of cash 
in hand. The Secretary, in his statement of the 
financial condition of the United States as an issuer 
of currency, shows that it will have in hand, on the 
first day of January, 1879, $ 22 4>3 2 4>459> wherewith 
to meet $435,098,400 of immediate liabilities; the 
reserves in his care equaling 51 per cent, of his im- 
mediate liabilities, or 6 per cent, greater than those 
of the Bank of England. But where are the secu- 
rities to take in the $210,773,941 of immediate lia- 
bilities in excess of his reserves ? To be rhetorical, 
we might say, " We pause for a reply ! " Suppose 
he should cease to make any further issues for sixty 
days, what would be his position ? Every dollar of 
his coin would be drawn, leaving him with liabilities 
exceeding $200,000,000, to meet which he would 
not have a dollar. So much for the comparative 
strength of the Bank of England and the Govern- 
ment of the United States, as issuers of currency. 

In regard to our national banks, continues the Secretary, 
here are some statements which are interesting to me, and 
which were prepared in consequence of our interview the 
other day. I think they will be interesting to the committee. 
The first paper contains the circulation and deposits and specie 
of the State banks in 1857 and 1860, as compiled from state- 
ments in the finance report of 1876, pages 204 and 205. The 
next paper contains the circulation, deposits, and cash reserve 
of the national banks on the 28th day of December, 1877. 


The latest statement of the banks I cannot give you, because 
it is not yet made up. It was made in March last, and the 
returns are not fully in. This statement shows a general 
demand liability of $960,816,052, and it shows a total cash 
reserve of $145,019,338. The ratio of legal-tender funds to 
the amount of circulation is 48.4 per cent. The ratio of 
legal-tender funds to circulation and deposits is 15.1 per 
cent. The next paper exhibits the circulation, deposits, and 
cash resources of the national banks on December 28th, 
1877, on a different basis, counting the amount of national 
bonds owned by the banks and deposited with the Treasurer 
as money. This other table excludes them entirely. This 
gives the same figures, but counting the bonds at their nomi- 
nal par as money, it shows this result : Total amount of 
liabilities, $960,816,052, and total amount of cash resources 
(including four hundred and five millions of bonds) at $550,- 
201,055. The ratio of cash resources to circulation is 183 
per cent., and the ratio of cash resources to circulation and 
deposits is 57 per cent. 

MR. EWING. Do you think that the bonds can be counted 
as cash ? 

SECRETARY SHERMAN. Yes ; the bonds are all worth par 
or above in gold. 

THE CHAIRMAN. The other cash held by the banks is legal- 
tender notes ? 

SECRETARY SHERMAN. Yes, and coin. 

MR. EWING. Do you think it safe to count these bonds as 
gold ? Is it possible to convert them into gold ? 

SECRETARY SHERMAN. Oh, yes. * * * 

MR. EWING. But I want to know now if you make up that 
table on the theory that these four hundred millions of bonds 
can be turned into gold for the purpose of resumption ? 

SECRETARY SHERMAN. I make up my statement on the 
theory that four hundred millions of bonds will more than 
pay four hundred millions of bank-notes at any time. 



The bonds of the United States are deposited in 
the Treasury, as security for the redemption of the 
notes of the banks. The inability of the latter to 
redeem their issues is a case of bankruptcy, upon 
which government undertakes to provide for their 
notes by the sale of the bonds. The bonds become 
available for such purpose only when the banks 
are in liquidation. To count such as cash, and 
available to meet a run for coin bonds of which, 
or of their proceeds, they can never get the posses- 
sion, but which are to be administered upon by 
the government as the assets of an insolvent and 
defunct corporation is as absurd as it would be to 
count the gold and silver to be mined after the be- 
ginning of the twentieth century as available by the 
banks to meet an emergency occurring on the 1st 
day of January, 1879. With the Secretary, money 
seems to be an idea, not a sober fact, and payment 
a ceremony in which nothing passes heavier than a 
graceful gesture or a few honeyed words. 

MR. EWING. Do you expect to pay out the silver dollar 
coined by you for current expenses, or only for coin liabili- 
ties, or to hoard it for resumption ? 

SECRETARY SHERMAN. I expect to pay it out now only in 
exchange for gold coin or for silver bullion. I am perfectly 
free to answer the question fully, because on that point, after 
consulting with many members of both Houses, I have made 
up my mind what the law requires me to do. I propose to 
issue all the silver dollars that are demanded in exchange for 
gold coin. That has been going on to some extent ; how far, 
I cannot tell. Then I propose to use the silver in payment 


for silver bullion, which I can do at par in gold. I then pro- 
pose to buy all the rest of the silver bullion which I need un- 
der the law with silver coin. As a matter of course, in the 
current course of business, some ot that silver coin will go 
into circulation ; how much, I do not know. The more, the 
better for us. But most of it, I take it, will be transferred to 
the Treasury for silver-certificates (that seems to be the idea 
of the bill), and those silver-certificates will come into the 
Treasury in payment of duties, and in that way, practically, 
the silver will belong to the government again. 

Until silver is so abundant that it becomes the acknowl- 
edged basis of coin transactions, we cannot pay out that silver 
for the ordinary expenses of the government, because we have 
not enough to pay all the expenditures in silver ; and if the 
silver is maintained at par with gold, and if the United States 
notes are below par with gold, we cannot discriminate in 
favor of any class of creditors ; we would, therefore, have to 
hold silver at par with gold until we either have enough to 
pay everything with it or until the legal-tender notes are 
practically at par with gold and silver. That is a matter 
over which I have no more control than any other citizen. 
The silver dollars being receivable for duties the law allow- 
ing them to be converted into certificates which are receiva- 
ble for customs I must receive them ; and I could not pre- 
vent, if I tried, the silver from coming into the Treasury, 
either for silver certificates or payment of duties. As to 
when I shall commence paying them out for the current ex- 
penditures of the government or in payment of the interest or 
principal of the debt, I cannot tell, because that would depend 
upon the equality of the three kinds of currency gold, sil- 
ver, and paper. I do not know whether I make myself un- 
derstood, but that is the general idea I have in my mind. As 
a matter of course, it being a great discretionary power 
which you have invested in the office of Secretary of the 
Treasury, while I hold the office I will be very careful toexer- 


else that power so as to carry out in good faith the law as 
Congress has passed it, and that law, I think, contemplates 
that gold, silver, and paper shall be all brought on an equiv- 

Instead of replying to the assumption by the 
Secretary of creative power, by means of which 
" the three kinds of money, gold, silver, and paper, 
are to be brought to an equality of value," let us 
take the most instructive example which history 
affords of the effect of currencies of different intrin- 
sic, but of equal denominational, value, and of the 
action of a great nation in face of the difficulties 
which now confront the people of the United 
States. In 1696, it was proposed to call in the 
outstanding silver coins of England, which were 
greatly reduced in value by abrasion and clipping, 
and issue, in their place, coins of full weight. This 
proposition at once raised in its full breadth the 
question precisely similar to that now raised in the 
United States ; whether coin money circulates 
at its denominational or at its bullion value. 

" The politicians of that age," says Macaulay, in his graphic 
picture of it, " marveled exceedingly that everybody should 
be so perverse as to use light money in preference to good 
money. In other words, they marveled that nobody chose to 
pay twelve ounces of silver when ten ounces would serve the 
turn. The horse at the Tower still paced his rounds ; fresh 
wagon-loads of choice money still came forth from the mill ; 
and still it vanished as fast as it appeared. Great masses 
were melted down ; great masses were exported ; great 
masses were hoarded ; but scarcely one new piece was found 


in the till of the shop or in the leathern bag which the farmer 
carried home from the cattle-fair. In the receipts and pay- 
ments of the exchequer the milled money did not exceed ten 
shillings in the hundred pounds. A writer of that age men- 
tions the case of a merchant who in the sum of thirty-four 
pounds received only a single half-crown in milled silver. 

" The evils produced by this state of the currency were not 
such as have generally been thought worthy to occupy a prom- 
inent place in history. Yet it may well be doubted whether 
all the misery which had been inflicted on the English nation 
in a quarter of a century by bad kings, bad ministers, bad 
Parliaments, and bad judges, was equal to the misery caused 
in a single year by bad crowns and bad shillings. Those 
events which furnish the best themes for pathetic or indig- 
nant eloquence are not always those which most affect the 
happiness of the great body of the people. The misgovern- 
ment of Charles and James, gross as it had been, had not 
prevented the common business of life from going steadily 
and prosperously on. While the honor and independence of 
the state were sold to a foreign power, while chartered rights 
were invaded, while fundamental laws were violated, hun- 
dreds of thousands of quiet, honest, and industrious families 
labored and traded, ate their meals, and lay down to rest, in 
comfort and security. Whether Whigs or Tories, Protest- 
ants or Jesuits, were uppermost, the grazier drove his beasts 
to market, the grocer weighed out his currants, the draper 
measured out his broadcloth, the hum of buyers and sellers 
was as loud as ever in the towns, the harvest-home was cele- 
brated as joyously as ever in the hamlets, the cream over- 
flowed the pails of Cheshire, the apple-juice foamed in the 
presses of Herefordshire, the piles of crockery glowed in the 
furnaces of the Trent, and the barrows of coal rolled fast 
along the timber railways of the Tyne. But when the great 
instrument of exchange became thoroughly deranged, all 
trade, all industry, were smitten as with a palsy. 


"Since the Revolution the state of the currency had been 
repeatedly discussed in Parliament. In 1689 a committee 
of the Commons had been appointed to investigate the sub- 
ject, but had made no report. In 1690 another committee 
had reported that immense quantities of silver were car- 
ried out of the country by Jews, who, it was said, would 
do anything for profit. Schemes were formed for encour- 
aging the importation and discouraging the exportation of 
the precious metals. One foolish bill after another was 
brought in and dropped. At length, in the beginning of the 
year 1695, the question assumed so serious an aspect that the 
Houses applied themselves to it in earnest. The only prac- 
tical result of their deliberations, however, was a new penal 
law, which, it was hoped, would prevent the clipping of the 
hammered coin and the melting and exporting of the milled 
coin. It-was enacted that every person who informed against 
a clipper should be entitled to a reward of forty pounds; 
that every clipper who informed against two .clippers should 
be entitled to a pardon ; and that whoever should be found 
in possession of silver filings or parings should be burned in 
the cheek with a red-hot iron. Certain officers were em- 
ployed to search for bullion. If bullion were found in a 
house or on board of a ship, the burden of proving that it 
had never been part of the money of the realm was thrown 
on the owner. If he failed in making out a satisfactory ac- 
count of every ingot, he was liable to severe penalties. This 
act was, as might have been expected, altogether ineffective. 
During the following summer and autumn the coin went on 
dwindling, and the cry of distress from every county in the 
realm became louder and more piercing. 

" But happily for England there were among her rulers 
some who clearly perceived that it was not by halters and 
branding-irons that her decaying industry and commerce 
could be restored to health. The state of the currency had 
during some time occupied the serious attention of four 



eminent men, closely connected by public and private ties. 
Two of them were politicians who had never, in the midst 
of official and parliamentary business, ceased to love and 
honor philosophy; and two were philosophers in whom hab- 
its of abstruse meditation had not impaired the homely good 
sense without which even genius is mischievous in politics. 
Never had there been an occasion which more urgently 
required both practical arid speculative abilities; and never 
had the world seen the highest practical and the highest 
speculative abilities united in an alliance so close, so har- 
monious, and so honorable as that which bound Somers and 
Montague to Locke and Newton. 

" In whatever Vay the restoration of the coin might be 
effected, great sacrifices must be made, either by the whole 
community or by a of the community. And to call for 
such sacrifices at a time when the nation was at war, and 
was already paying taxes such as ten years before no financier 
would have thought it possible to raise, was undoubtedly a 
course full of danger. Timorous politicians were for delay; 
but the deliberate conviction of the great Whig leaders was 
that something must be hazarded, or that everything was 
lost. Montague, in particular, is said to have expressed in 
strong language his determination to kill or cure ! If, in- 
deed, there had been any hope that the evil would merely 
continue to be what it was, it might have been wise to defer 
till the return of peace an experiment which must severely 
try the strength of the body politic. But the evil was one 
which daily made progress, almost visible to the eye. There 
might have been a recoinage in 1694 with half the risk which 
must be run in 1696, and great as would be the risk in 1696, 
that risk would be doubled if the recoinage were postponed 
till 1698. 

" Those politicians whose voice was for delay gave less 
trouble than another set of politicians who were for a general 
and immediate recoinage, but who insisted that the new 


shilling should be worth only ninepence or ninepence half- 
penny. At the head of this party was William Lowndes, 
Secretary of the Treasury, a most respectable and industrious 
public servant, but much more versed in the details of his 
office than in the higher parts of political philosophy. He 
was not in the least aware that a piece of metal with the 
king's head on it was a commodity of which the price was 
governed by the same laws which govern the price of a piece 
of metal fashioned into a spoon or a buckle, and that it was 
no more in the power ol Parliament to make the kingdom 
richer by calling a crown a pound than to make the kingdom 
larger by calling a furlong a mile. He seriously believed, 
incredible as it may seem, that if the ounce of silver were 
divided into seven shillings instead of five, foreign nations 
would sell us their wines and their silks for a smaller num- 
ber of ounces. He had a considerable following, composed 
partly of dull men who really believed what he told them, 
and partly of shrewd men who were perfectly willing to 
be authorized by law to pay a hundred pounds with eighty. 
Had his arguments prevailed, the evils of a vast confiscation 
would have been added to all the other evils which afflicted 
the nation ; public credit, still in its tender and sickly infancy, 
would have been destroyed, and there would have been much 
risk of a general mutiny of the fleet and army. Happily Lown- 
des was completed refuted by Locke in a paper drawn up for 
the use of Somers. Somers was delighted with this little 
treatise, and desired that it might be printed. It speedily 
became the text-book of all the most enlightened politicians 
in the kingdom, and may still be read with pleasure and 

The proposition of Lowndes was for a recoinage 
of the currency with one-fifth less metal than the. 
standard of the old coins ; " to raise," to use his own 
words, " the value of the silver in the coins to the 


foot of 6s. $d. in every crown, because the price 
of standard silver in bullion is risen to 6s. ^d. an 
ounce." Bullion, when purchased and paid for in 
the debased coins, had risen in ratio to their depre- 
ciation ; in other words, five light coins were re- 
quired to purchase a given weight of bullion which 
could have been purchased by four coins of full 
weight. Locke was called upon to prove, and did 
prove most conclusively, that equal weights of sil- 
ver were equal in value to equal weights of equal 
fineness ; and, consequently, that nothing could be 
gained, at home or abroad, by altering the stand- 
ard, as the coins, both at home and abroad, would 
pass only at their value measured by weight and 
fineness.^ It would seem that the conclusions to 
which Locke came might have been assumed as 
axioms, from which he might have commenced his 
argument. In it the whole question of the nature 
of metallic money, and the relation of coinage to 
the value of the coins, was discussed with a force 
and amplitude which left nothing for future gener- 
ations but to repeat the demonstrations which he 
piled, with matchless profusion, one upon another. 
Nearly two hundred years have elapsed ; and when 
precisely the same question comes up in the United 
States, instead of recurring to the example of Eng- 
land in a similar crisis, and the demonstrations which 
forever settled the question of coinage in that coun- 
try, and which was equally applicable to the coin- 
age of every other, Congress proceeds to enact ab- 


surdities far greater than those which Lowndes 
proposed, not only by attempting to raise ten per 
cent, the value 'of silver, by the insignia imposed 
upon it, but in attempting to give to the notes of 
the government, for the redemption of which only 
one-third their amount is to be provided, a value 
equal to their nominal amount in coin. 

The plan for relief finally adopted provided that 
the money of the kingdom should be recoined ac- 
cording to the old standard of weight and fineness ; 
that all the pieces should be " milled," and that 
the loss on the clipped pieces should be borne by 
the public. A time was fixed after which no 
clipped money should pass, except in payments to 
the government, and a later time after which no 
clipped money should be passed at all. To- make 
up in part the loss on the clipped coins, the Bank 
of England undertook, on the security of the 
window-tax, to advance to the government .1,200,- 
OOO. This advance afforded only partial relief. 
Full relief could only be had when the new currency 
should come in sufficient abundance to fill up the 
vacuum made by calling in the old. 

" Saturday, the 2d of May, 1696," continues Mr. Macaulay, 
" had been fixed as the last day on which the clipped crowns, 
half-crowns, and shillings were to be received by tale in pay- 
ment of taxes. The Exchequer was besieged from dawn till 
midnight by an immense multitude. It was necessary to call 
in the guards for the purpose of keeping order. On the fol- 
lowing Monday began a cruel agony of a few months, which 


was destined to be succeeded by many years of almost un- 
broken prosperity. 

" Most of the old silver had vanished. The new silver had 
scarcely made its appearance. About four millions sterling in 
ingots and hammered coin was lying in the vaults of the Ex- 
chequer; and the milled money as yet came forth very slowly 
from the mint. Alarmists predicted that the wealthiest and 
most enlightened kingdom in Europe would be reduced to 
the state of those barbarous societies in which a mat is 
bought with a hatchet, and a pair of moccasins with a piece 
of venison. There were, indeed, some hammered pieces 
which had escaped mutilation ; and sixpences not clipped 
within the innermost ring were still current. This old money 
and the new money together made up a scanty stock of silver, 
which, with the help of gold, was to carry the nation through 
the summer. The manufacturers generally continued, though 
with extreme difficulty, to pay their workmen in coin. The 
upper classes seem to have lived to a great extent on credit. 
Even an opulent man seldom had the means of discharging 
the weekly bills of his baker and butcher. A promissory 
note, however, subscribed by such a man, was readily taken 
in the district where his means and character were well 
known. The notes of the wealthy money-changers of Lom- 
bard Street circulated widely. The paper of the Bank of 
England did much service. 

" The directors soon found it impossible to procure silver 
to meet every claim which was made on them in good faith. 
They then bethought them of a new expedient. They made 
a call of twenty per cent, on the proprietors, and thus raised a 
sum which enabled them to give every applicant fifteen per 
cent, in milled money on what was due to him. They re- 
turned him his bank-note, after making a minute upon it that 
part had been paid. A few notes thus marked are still pre- 
served among the archives of the bank, as memorials of that 
terrible year. The paper of the corporation continued to circu- 


late ; but the value fluctuated violently from day to day, and 
indeed from hour to hour ; for the puplic mind was in so excit- 
able a state that the most absurd lie which a stock-jobber could 
invent sufficed to send the price up or down. At one time 
the discount was only six per cent., at another time twenty- 
four per cent. A ten-pound note, which had been taken in 
the morning as worth more than nine pounds, was often 
worth less than eight pounds before night. 

"Meanwhile, strenuous exertions were making to hasten 
the recoinage. Since the Restoration, the mint had, like 
every other public establishment in the kingdom, been a nest 
of idlers and jobbers. The important office of warden, worth 
between six and seven hundred a year, had become a mere 
sinecure, and had been filled by a succession of fine gentle- 
men who were well known at the hazard-table at Whitehall, 
but who never condescended to come near the Tower. This 
office had just become vacant, and Montague had obtained it 
for Newton. The ability, the industry, and the strict upright- 
ness of the great philosopher speedily produced a complete 
revolution throughout the department which was under his 
direction. He devoted himself to his task with an activity 
which left him no time to spare for those pursuits in which he 
had surpassed Archimedes and Galileo. Till the great work 
was completely done, he resisted firmly, and almost angrily, 
every attempt that was made by men of science, either here 
or on the Continent, to draw him away, from his official 

" It may well be doubted," says Macaulay, 
" whether all the misery which had been inflicted 
on the English nation in a quarter of a century by 
bad kings, bad ministers, bad parliaments, and bad 
judges, was equal to the misery caused in a single 
year by bad crowns and bad shillings " (silver being 


the coin then in use). If crowns and shillings 
amounting only to a few millions sterling, bad from 
not containing metal equaling their nominal value, 
but entirely good for the whole amount of the 
metal they did contain, and which never fluctuated 
from their true value, produced such disastrous re- 
sults, what would be the necessary effect of a cur- 
rency of government notes equaling $350,000,000, 
possessing no intrinsic value whatever, and which 
represented no other constituent but the promise 
of the issuer to pay without interest at his own 
pleasure ? This currency, like that of England in 
1696, is not only below the full standard of coin, 
but is constantly fluctuating in value from the un- 
certainty as to the time of its payment, an infirm- 
ity from which the English currency was wholly 
free. The slightest consideration will show that 
of all currencies one of government notes is the 
worst, for the reason that there is nothing by which 
its value can be tested. The value of a debased 
metallic currency is the value of the bullion it con- 
tains. The value of a depreciated currency of 
banks is shown by their books. But what books 
will show the value of a currency of government 
notes? What was the value of those of the United 
States sixteen years ago ? What ten years ago ? 
What is it now ? A mere matter of opinion, till 
government takes action ; its value will then de- 
pend upon the degree of such action. The unex- 
ampled depression artd torpor which have hung like 


a pall over the country for so many years are refer- 
able to causes the necessary effects of which are 
far more palpable than those of the distress of 
which Macaulay has drawn such a striking picture. 
Was there ever an opportunity so well fitted as 
then to determine the nature of money; whether 
or not value was a necessary attribute of it ; and 
whether a value could be given by legislation, by 
coining it at a rate greater than its price in bullion, 
as that afforded by England at the period de- 
scribed ? Was not the result there conclusive of 
the whole question ? If coins of that country, not- 
withstanding the great demand for them, could be 
made to circulate only at their bullion value, can 
the notes of the United States which, as currency, 
are to be abraded or clipped to the extent of two- 
thirds of their value, be made to circulate at par 
with coin ? 

The great problem always before society is dis- 
tribution not production. The latter can always 
be speedily pushed to almost any extent. It 
may be wholly independent of the causes which 
may defeat distribution altogether. The rumor 
of social or political disturbance will create such 
a distrust on the part of merchants that they 
will immediately suspend their operations till the 
result can be known. In this country the uncer- 
tainties to which they are subject from our cur- 
rency are more to be feared than war itself. The 


remedy is precisely the remedy adopted in Eng- 
land, the restoration of the currency to the value 
of its standard coin by the provision of an adequate 
constituent. So far from having any disposition to 
follow such example, our government has turned 
clipper on a colossal scale, committing in effect 
what in England would have sent the offender to 
the gallows, by imposing upon the people at the 
par of gold, silver coins whose bullion value is ten 
per cent, below their denominational value. 

In reply to the inquiry of Mr. Ewing, as to the 
purposes for which the new silver coins -would be 
used, the Secretary replied that he proposed, first, 
to exchange all the silver dollars demanded for 
gold coin. He then proposed to use silver dollars 
in the purchase of silver bullion for coinage, which 
he says he can do, using the former at the par 
value of gold. For general purposes for the ex- 
penses of government and the payment of inter- 
est he would not for the present pay out silver ; 
in other words, he would not discriminate in favor 
of any creditor, by paying silver, till the three cur- 
rencies, gold, silver and notes, all came to an 
equality of value. He will very soon have, if he 
has not already had, an opportunity of putting his 
methods to a test. He may, for a little time, get 
from those who have duties to pay a higher price 
for his silver dollars than that due to their bullion 
value; but this accidental advantage will be lost 


so soon as the government notes are receivable, as 
he proposes, for customs revenues. But, his silver 
dollars once in the Treasury, how is he going to get 
them out ? Who is going to take silver at a value 
ten per cent, less than that of gold ? Who is going 
to take notes which are even not demand liabili- 
ties, and for which only partial provision has been 
made? When the equality he proposes is estab- 
lished, then the Model Republic may well plume 
its wings for a far loftier flight than thai taken 
by any other nation. But if the equality be at- 
tempted, and disgraceful defeat follow, then must 
the Model Republic submit, as best it may, to the 
taunts and jeers that other nations will pour upon 
it in no scant measure. Our chronic conceit taken 
out of us, and the ground cleared, for the moment, 
of those who have led us into disaster- and disgrace, 
the Nation may, for the first time, address itself 
to the only measures that can yield permanent 
relief, and restore to it its wonted prosperity. 

MR. EWING. In case of a drain of gold from the Treasury, 
what measure would you resort to to check it I mean after 
resumption ? 

SECRETARY SHERMAN. The Treasury ought to be so strong 
that the thing would check itself. You can scarcely imagine, 
in the probabilities of business, that, with no outstanding 
liabilities that are not covered by actual cash on hand except 
the $300,000,000 of legal-tender notes, the drain upon the 
government would be so great as to exhaust the reserve of 
$120,000,000. That proposition is all based, not upon the 
fact that $120,000,000 would pay $300,000,000 we all know 


that is not so but upon the fact that it is impossible to 
gather together United States notes and to present them in 
such a mass and in such a continuous stream, and that the 
very effort to do so would raise the value of United States 
notes. Their convenience is so great, and the necessity for 
them so apparent, that such an effort would at once bring 
them up to par in gold. I think that a drain of five, ten, fif- 
teen, or twenty millions would at once tend to bring up the 
value of greenbacks until they were at par in gold, and then 
there would be no object at all in drawing them out. 

MR. EWING. After resumption the greenback must remain 
at par ingold as long as the Treasury maintains resumption ? 

SECRETARY SHERMAN. Certainly ; and while they are at 
par in gold they will not be presented to any considerable 

MR. EWING. Of course, if there was an established differ- 
ence of I per cent., or one-half of I per cent., between gold 
and greenbacks, the Treasury would be broken pretty quick ? 

SECRETARY SHERMAN. Yes, sir, or a quarter of i per cent. ; 
there is no doubt about that. 

MR. EWING. Therefore, after resumption, greenbacks must 
necessarily be at par with gold so long as the Secretary is 
able to maintain resumption ? Now, I am supposing a case 
of a drain of gold from the action of foreign creditors, or 
from any other cause, and want to know what means you 
would resort to to check it ? 

SECRETARY SHERMAN. I do not think that it would be 
necessary to resort to any means ; but if it were necessary to 
devise some means, I would resort to such as have been 
adopted in other countries the temporary suspension ot 
specie payment. That is a question for Congress. The Brit- 
ish Bank Act, which is so often .quoted as the standard, 
makes no provision for suspension ; there is no legal suspen- 
sion of payment in England, nor does our law make any pro- 
vision for it. If the government should meet such an adverse 



state of circumstances as to make suspension absolutely 
necessary, the government would necessarily have to take 
the responsibility of it, leaving Congress to determine whether 
the circumstances justified it. That has always been so. 

The old story in the above, that when the holders 
of notes see that they can be paid, they will not 
want to be paid, need not be further replied to. 
In case of pressure, no steps to meet it need be 
taken, for the reason that none could be taken. 
When it was seen that government could no longer 
go on, all it would have to do would be to follow 
the example of other nations suspend. But the 
Secretary forgot that nations issuing currencies like 
that of the United States never resume. Resump- 
tion means payment, an alternative which they 
cannot face. The longer the suspension is con- 
tinued, the more impoverished does a nation be- 
come. Russia is a notable example for the Secre- 
tary. She is under suspension, which, like that of 
the United States, is chronic. Resumption with 
either will be an end to its currency. The English 
Government never authorizes the Bank of England 
to suspend, only to exceed the amount of notes 
provided by law. It must pay coin all the same, 

A drain of five, ten, fifteen or twenty millions 
would, the Secretary tells us, at once bring up the 
greenbacks to a par with gold, and the drain would 
stop. How would five, ten, fifteen or. fwenty mill- 
ions of coin be drawn by means of notes, unless 



the notes were at the par of coin ? And why 
should the raising of the notes to par stop the 
drain ? Upon the principle stated by the Secre- 
tary, a drain of fifty millions might advance the 
notes to twenty-five per cent, premium ; a drain of 
a hundred to fifty per cent, premium ; a drain of 
two hundred might advance the value of the $140,- 
000,000 left outstanding so that they would com- 
mand at auction a greater sum than the present 
value of the whole. 

MR. HARTZELL. What would be the effect of this resump- 
tion act upon the national banks and their depositors ? 

SECRETARY SHERMAN. I cannot see that it will have any 
injurious effect. Wherein ? 

MR. HARTZELL. I understand from your statement here 
last Monday, that the national banks hold $600,000,000 of 
deposits. Lack of confidence might induce the depositors 
to go to these national banks and demand, on the ist of Jan- 
uary, or soon after the resumption act takes effect, a large 
amount of gold. * * * 

SECRETARY SHERMAN. Your question is a very proper one. 
I can only give you my idea. All banking is based upon 
the idea that a larger amount of paper money can be main- 
tained in circulation than the money in which it is to be 
redeemed. Otherwise there would be no object in bank- 
ing. * * * 

MR. EWING. What about the $1,500,000,000 of deposits in 
other banks than national banks ? 

SECRETARY SHERMAN. They are private individual debts ; 
the government has nothing to do with them. 



MR. EWING. The government has certainly to consider 
them in the plan of resumption ? * * * 

SECRETARY SHERMAN. It is all to be considered ; but $10 
will pay $100 of deposits in the ordinary course of busi- 

MR. HARTZELL. Does the mere fact that the government 
will, on the 1st of January, be able to redeem all its legal- 
tender notes, bring us of itself to specie resumption ? Is 
that what we mean by specie resumption ? 

SECRETARY SHERMAN. I mean by specie resumption not 
the payment of all these debts in coin, but I mean the 
equivalency of these United States notes with coin, so that 
the people will take paper at par with coin, and if they want 
the coin they can get it. I do not suppose that $i out of 
$100 of greenbacks will be presented for redemption. 

Resumption by the government would not, says 
the Secretary, injuriously affect the national banks, 
or their depositors, for the reason that they would, 
as now, use government notes. A few of these 
would suffice, for with him " all banking is based 
upon the idea that a larger amount of paper money 
can be maintained in circulation than the money 
in which it is to be redeemed," when resumption 
takes place. " I do not suppose," he continues, 
" that $i out of $ 100 of greenbacks will be presented 
for redemption." The preceding extracts indicate 
precisely the rock upon which the Secretary and 
his whole scheme are to make a disastrous ship- 
wreck. All paper money, if it be convertible, will 
be very speedily presented for payment, and must 
be paid when presented. The means provided 


by the banks for the payment of that issued by 
them is not "money" coin but merchandise; 
"money "being simply held to supplement such 
means. If a bank conduct its business properly 
if it make no bad debts, and discount only such 
bills as mature within periods of ninety days all 
its issues will be taken in without the use of a 
dollar of the kind of " money " to which the 
Secretary refers. If not returned by means of 
merchandise, it must be taken in by the paying out 
of coin. As the government is not a discounter 
of bills, the representatives of merchandise, all its" 
issues must be taken in by the paying out of coin. 
It is just as impossible that a currency lacking pro- 
vision for its redemption should circulate at the 
par of coin as that holders of dollars should will- 
ingly accept half-dollars in exchange. Well, there- 
fore, may the Secretary declare that his kind of 
resumption is not payment, but " an equivalency," 
" so that the people can get gold when they want 
it." How is this equivalency to be secured ? Cer- 
tainly not by a provision equaling only one-third 
the amount of the notes ; nor by an agreement to 
receive them equally with gold in the payment of 
the revenues. Suppose the Secretary were to an- 
nounce that he would receive notes and coin equal- 
ly in the payment of the revenues. Not a dollar 
would be paid but in the cheapest currency. If 
silver could be had at a price 10 per cent, below 
that of gold, and 9 per cent, below that of green- 



backs, this would be wholly used. If notes fell to 
a discount from silver, then they would be used. 
Not a dollar of gold would ever come into the 
Treasury. The Secretary, so soon as he had ex- 
hausted his present hoard, would not have a dol- 
lar of it to pay " to the people when they wanted 
it." His plan of resumption reminds one of the 
celebrated proposition of Charles II. to the Royal 
Society : " Why, if you put a live fish into a vase 
full of water, will the water not overflow ? " Many 
and long were the speculations and conferences 
of the learned members to solve this wonderful 
freak of nature, till at last it occurred to one of 
them to put a live fish into a full vase. The ques- 
tion was instantly answered. 

MR. CHITTENDEN. Will not the mixed condition of the na- 
tional bank currency be an element of strength in facilitating 
resumption ? For example, if you were to present national 
bank currency to a bank for redemption, you must separate 
the notes. If you take any given amount of national bank 
currency which you find on deposit anywhere, you will be 
surprised to find how it represents banks from all sections of 
the country. I take it that no bank can be called upon to re- 
deem any but its own issue. 

SECRETARY SHERMAN. That is so ; it is almost impossible 
to sort national bank bills. 

MR. CHITTENDEN. Will that be for you an element of 
strength or of weakness ? 

SECRETARY SHERMAN. It will be an element of strength. 
The difficulty of sorting national bank bills is very great. 
When they come to sort them in the Treasury the bills have 
to pass through four or five skilled hands. First, they are 



sorted into States, then into denominations, and then into 
banks. If you were to try and make a run on any particular 
bank in this country, as they used to do twenty or thirty 
years ago, it would be impossible to do so from the difficulty 
of assorting notes of different banks. 

The better way would be to have all the bank 
notes of the same type. In such case no bank 
would be called upon to redeem its issues, for the 
reason that the notes for which it was liable could 
never be certainly identified. In this way, all 
would be on a specie basis, without being exposed 
to be called upon for a dollar ! 

THE CHAIRMAN. * * * * * * if they can be also 
received for duties at the custom-house, it would help you in 

SECRETARY SHERMAN. Yes. As soon as we resume, or 
are ready to resume, we ought to receive greenbacks for cus- 
toms duties. 

THE CHAIRMAN. And bring them on a par with gold also 
by making them exchangeable for bonds. 

SECRETARY SHERMAN. Yes ; or redeem such as are pre- 
sented in coin. 

THE CHAIRMAN. On that theory of resumption you would 
resume already, in order to have practical resumption. 

SECRETARY SHERMAN. Yes : that is resumption, and we 
would not know about it. 

We most sincerely regret that the Secretary 
will never know the happy moment in which he 
will resume, more on account of the country than 
his own. When resumption comes, he, with the 
whole people, will know it all too well. Such 



a devil as that which now possesses the nation 
is of the kind " that goeth not out but by prayer 
and fasting." 

MR. EwiNG. 'And you could thus maintain an equality of 
coin and paper upon your theory, which is, that as soon as 
paper and coin are equal, nothing will be likely to occur to 
disturb the equilibrium ? 

SECRETARY SHERMAN. There will be more or less fluctua- 
tion, and we must be prepared to meet those fluctuations, so 
that if greenbacks become superabundant we can get gold 
for them ; or if, on the other hand, gold becomes a drug, 
as it may, it will be deposited for greenbacks. 

MR. EWING. But if greenbacks become superabundant, 
and are presented to the Treasury for redemption, you will 
have to pay them out again ? 

SECRETARY SHERMAN. Yes, as soon as the equivalency is 

MR. EwiNG. That is, you will hold whatever greenbacks 
come in until there is an equivalency ? 

SECRETARY SHERMAN. Yes ; that is the effect of it. 

MR. EWING. The Bank of England, when a drain sets 
in, interrupts the movement of circulation by taking in its 
notes and not paying them out until the drain is checked. 
In that respect your idea of maintaining resumption is the 

SECRETARY SHERMAN. Yes. When the notes are pre- 
sented, the Secretary of the Treasury pays them in coin, sil- 
ver or gold, at his discretion. * * * 

MR. EWING. But he would not pay them out 

SECRETARY SHERMAN. Unless they were equivalent to coin. 

MR. EWING. And he would judge of their equivalency by 
the drain upon the Treasury ? 

SECRETARY SHERMAN. He would never be likely to pay 


out these greenbacks if they were to come back again on 
him for coin ; and he would not be wise if he did it v 

MR. EWING. In that respect, he maintains resumption by 
exercising the same power and control over the paper cur- 
rency as the Bank of England does. 

SECRETARY SHERMAN. Yes, sir. * * * 

MR. EWING. I think I have your idea pretty clearly that 
your control in putting out legal tenders or withholding 
them is the lever by which their convertibility is to be main- 
tained ? 

SECRETARY SHERMAN. Yes ; and then there is, too, the 
fact that the Secretary is under the constant eye of Congress 
if he abuses his powers. * * * 

MR. EWING. If there is a drain of gold you would sell 
bonds ? 

SECRETARY SHERMAN. The Secretary might sell bonds, 
and, again, when greenbacks were abundant in the Treas- 
ury, he might make a call for six per cent, bonds, as I have 
done. So, the Secretary of the Treasury, administering under 
this law, if he found coin or greenbacks accumulating in his 
hands, would make a call of six per cent, bonds and would 
pay them off and sell four per cent, or four and a half per 
cent, bonds whichever was the current bond in the mar- 
ket and thus make good his money. That operation would 
go on without difficulty. That is the way, at least, that I 
would conduct it if I were in charge. 

In the preceding extracts both the Secretary and 
Mr. Ewing again travel over with renewed empha- 
sis the ground already many times traced. How- 
ever much they differed, both agreed in this that 
in case of a drain of gold the action of the Bank of 
England, under similar conditions, was to be the ex- 
ample for our government. The movement of the 


precious metals was to be controlled by increasing 
or decreasing the amount of government notes in 
circulation. The inward flow of notes was to be 
checked by withholding, for a time, such as were 
returned. In such case gold would soon become a 
"drug" from its abundance, and its holders would 
be glad to return it for a more portable and con- 
venient kind of currency. There will be some ab- 
errations, to be sure, as there are in the movement 
of the heavenly bodies ; but a wise law of equiva- 
lency, which the Secretary so well knows how to 
apply, and which is the sheet-anchor of his system, 
will make everything square in the end. The ebb 
and flow of the monetary currents will be only the 
ebb and flow of the tide, which, instead of being 
hurtful, is one of the most beneficent processes in 
nature. Like the tides, the Secretary's monetary 
machine, once set agoing, will work 'with auto- 
matic regularity, shaming the jeering and doubting 
Thomases who had regarded it with mingled feelings 
of dread and scorn. But are not some limitations 
imposed upon the Secretary of the Treasury which 
would somewhat interfere with his role of imitating 
the Bank of England in the management of the 
currency? The Bank is a lender of money cur- 
rency at whatever rate of interest it chooses to 
establish. It does not, as Mr. Ewing and the Sec- 
retary assume, seek to control the movement of 
specie by means of a greater or less amount of its 
notes. The Bank, unfortunately perhaps, has no 


discretion in the matter of their issue. It must dis- 
count at periods of the greatest distrust and pres- 
sure upon it all the paper that comes within the 
rules established, not in a panic, but when every- 
thing was smooth and easy. It may very plainly see 
the consequences to which such a course must 
lead ; but by the theory of its organization, the 
public, not itself, are the judges of the amount of 
currency that is needed. It was its boast that dur- 
ing the crises of 1847, 1 857 and 1866, it never refused 
any paper proper for discount. When a crisis 
threatens, it says to the government, " You created 
the Bank to supply the country with currency. 
This will be supplied so long as a note remains in 
its vaults. If it fails, the responsibility will rest 
upon the law, not upon the Bank." The govern- 
ment fully acquiesces in such construction, and es- 
capes the effect by setting the law aside. Our Sec- 
retary, not being a lender of money, and having no 
control by means of rates of interest over the ebb 
and flow of specie, proposes to do what the Bank 
never attempts to withhold his notes when there 
is a run for gold, and pay them out freely when 
gold becomes a drug. But how is he to enact the 
role which he assumes with' such alacrity? He is a 
public officer. All his duties and functions are 
prescribed by law. If he exceeds them in the 
slightest degree, he becomes a criminal in the eye 
of the law. He cannot touch a dollar but upon 
a proper voucher. Those to be paid, not himself, 



determine the time of payment. In his preten- 
sions to regulate the mighty currents that are con- 
stantly moving with resistless force through com- 
mercial affairs, he reminds one of the philosopher 
in the story of Rasselas, upon whose watchful care 
depended the orderly movement of all the heavenly 
bodies. The philosopher was harmless from his 
impotence. The Secretary, as impotent for good, 
is yet as potent for mischief in his sphere as would 
have been the philosopher in his, could he have 
touched the stars. Suppose $50,000,000 of coin 
be drawn. How is this to be recovered ? He says 
he will sell bonds. This will not help him ; for 
while he is selling bonds with one hand, he is 
buying bonds with the other. The incoming rev- 
enues meet the current expenses. He assumes 
that the withdrawal from circulation of the fifty 
millions of notes will make them so scarce that the 
people will bring back the coin for the sake of get- 
ting them. But what would they want the notes 
for ? The gold, or the greater part of it, would 
have been drawn to serve as reserves for issues by 
banks, exceeding perhaps five times the amount 
drawn issues which would form a far better cur- 
rency than the notes of the government, from be- 
ing at all times convertible into coin. 

The difference between the Treasury of the 
United States and the Bank of England is far 
wider than the difference in the functions of the 


two. The latter is managed by twenty-five direc- 
tors, including the governor, who are merchants 
selected for their probity, intelligence, and ability in 
commercial and monetary affairs ; and who, in the 
discharge of their duties, are administering upon 
their own estates. A wide and enlightened experi- 
ence has taught them that their gains are in ratio 
as the general welfare is advanced. Never, through 
the long period of the existence of the Bank, has a 
charge been brought against them of knowingly 
sacrificing the public welfare to their own. The 
operations of the Treasury of the United States, 
instead of being directed by twenty-five merchants 
selected for a reputation acquired through a long 
and honorable career in their various lines of busi- 
ness, are almost certain to be committed to persons 
without training for the positions they hold, who 
have no direct personal interest in the result, and 
who are constantly liable to be the sport of the cur- 
rents and counter-currents which, in a country like 
our own, are always moving in some direction 
with almost resistless force. All will recollect that, 
a few years* ago, a Secretary of the Treasury, in obe- 
dience to the pressure brought upon him, or to an 
assumed necessity, re-issued in manifest violation of 
law, or what was believed to be law, a large amount 
of notes that had been taken in for cancellation. 
The future in this respect is certain to repeat the 
past. What a few years ago was a violation of the 
law, deserving the severest reprobation, has now be- 



come the established policy of the government. 
Are the merchants and bankers, are the people, to 
commit to the class of men who are likely to pre- 
side over the Treasury the custody and direction 
of affairs whose proper management requires the 
maturest experience and the highest qualities of 
character and mind ? If so, the Model Republic 
may without further delay hang out the sign, 
" These premises to let, the recent occupant having 
given up the business." But our people are not 
yet come to such a pass as this. So long as there 
is sense enough on their part to exact an equiva- 
lent in their transactions, they will never finally 
rest till the currency they use is the equivalent of 
coin, no matter how long and tortuous the path 
through which they may be led. 

The above summary of the famous conferences 
between the Secretary of the Treasury and the 
leading committees of Congress, shows his views on 
the subject of resumption and the means necessary 
to be provided therefor. It is not payment, says 
the Secretary, but equivalency between government 
notes and coin, so that no one will have any motive 
to convert the one into the other. Such equiva- 
lency is to be secured by a partial provision of coin 
and by enlarging the sphere of use of the notes. 
With such provision, he does not anticipate that 
one note in a hundred will ever be presented. It 
must, however, be re-enforced by the retention of 


the legal-tender clause, and by allowing him to pay 
out the notes to the full extent of those outstand- 
ing at the time resumption was a fait accompli 
in other words, to pay, or not to pay, to suit his 
own ideas of convenience or necessity. From the 
Senate Committee he received nothing but com- 
plete acquiescence. He was met in a very different 
temper by that of the House, which is the great 
nucleus of the enemies of resumption. The leading 
figure in it is Mr. Ewing, of Ohio, an earnest advo- 
cate of the complete substitution of irredeemable 
government money for that of banks. He agreed 
with the Secretary that the notes, or the greater 
part of those outstanding, should remain out ; but 
was wholly opposed to making any provision there- 
for. At the same time he, contended that the pro- 
posed provision was wholly inadequate to its object. 
The point of controversy was narrowed to this 
Mr. Ewing: "If you have only $120,000,000 of 
coin, how are you going to pay $647,000,000 of 
notes?" "My dear sir," replies the courteous 
Secretary, "nothing is further from our purpose 
than paying. Heaven forbid that we should at- 
tempt anything of the kind ! for how can $120,000,- 
ooo pay $647,000,000, or even $347,000,000? But 
we must make a show of paying. If we do, no one 
will want to be paid." Mr.. Ewing could only ask, 
"What if the holders of the notes should want to 
be paid? How can you do it?" The Secretary 
could only reply, "//"they do not want to be paid, 



am I not all right ? " He could not by any possi- 
bility explain why the notes would not be present- 
ed for payment, nor could Mr. Ewing why they 
would. The if, on either side, was the pons asino- 
rum which neither could pass ; " and so they meas- 
ured swords, and parted." With the single excep- 
tion of Mr. Chittenden's questions, with the answers 
to which he appeared fully content, neither con- 
ference elicited an expression which indicated 
the least understanding of the laws and nature of 
money, or the slightest appreciation of the mighty 
significance of the subject under discussion. 

What is the great problem now before the coun- 
try? The restoration of its power of natural ac- 
tion in the operations of production and trade. 
This is all. How is such a result to be accom- 
plished ? By repealing all laws which seek to give 
to money of any kind a legal competency greater 
than that due to its intrinsic or representative 
value. If government wishes to enter the field 
upon such terms, let it enter it. What its money 
would be without provision for its enforced circu- 
lation, the Secretary of the Treasury has already 
told us : " If you strike out this legal-tender clause, 
the government notes will fall dead upon the 
money markets of the world. They will be refused 
by the banks, and will be refused as a subordinate 
and disgraced currency that will not pass from 
hand to hand." If bank notes were made legal 


tender, " they would," to repeat the Secretary (in- 
stead of circulating as they now do in countries 
upon a specie basis at the par of coin), " fall dead 
upon the money markets of the world ; they would 
be a subordinate and disgraced currency, and would 
not pass from hand to hand." Why? For the rea- 
son that such provision, if it could be availed of 
by the issuer, might defeat payment altogether. 
Why should government money possess an immu- 
nity not accorded to that of banks? What is bank 
money? Instruments arising out of production 
and trade, which disappear with their constituent. 
Such instruments are similar in kind to thousands 
whereby cumbrous or expensive processes are 
avoided or abridged, the welfare of society being 
advanced in like ratio. What is government 
money? Debt payable at its pleasure. It never 
disappears, for the reason that no constituent can 
be reached by its use. The two kinds are as unlike 
as capital is to debt as something is to nothing. 
Why persist in the attempt to make nothing per- 
form the function of something? The problem is 
one that defies solution. It has been tried a thou- 
sand times with precisely the same result inflation 
so long as the issues continue, with an extravagant 
expenditure of all kinds in ratio to the amount, to 
be followed by an exhaustion in proportion to the 
delirium all, perhaps, to have the fate of the Con- 
tinental money of the United States and the As- 
signats of France, which in their fall involved the 


material and moral welfare of the two nations in 
a common ruin. 

It may be proper to advert briefly, in this con- 
nection, to an alleged saving by the use of notes 
equal to the interest on the amount outstanding. 
The saving proceeds upon the assumption that 
government can borrow without paying interest. It 
can no more do this than can an individual. Inter- 
est does not arise out of considerations due to either 
lender or borrower, but solely out of those due to 
the thing itself. Bills discounted at bank do not 
usually bear interest on their face. It is none the 
less paid. Government notes do not bear interest ; 
but the moment they are issued, they fall to a dis- 
count which is assumed to equal the interest on 
their amount till they are paid. In less than six 
months after the first issue of legal-tender notes of 
the United States were made, gold rose to a pre- 
mium of 37-f per cent. This premium was but an- 
other word for interest on their amount until, in 
public opinion, they would be paid. At one time 
the premium rose to 185 per cent. The average 
premium for 1863, 1864, and 1865 equaled fully 60 
per cent. Within such periods the debts incurred 
by the government and States on account of the war 
equaled $3,000,000,000. The excess of expendi- 
ture, or liability incurred due directly to use of the 
government money bearing no interest, equaled fully 
$2,000,000,000, the annual interest on which at 5 
per cent, equals $100,000,000 annually. Part of this 


vast sum, it is true, has been paid ; but more than 
half of it remains unpaid, and calling for interest 
equaling $50,000,000 annually. So much for the 
saving assumed to be effected by the use of a 
few hundred millions of non-interest-bearing debt. 
The attempt to avoid the payment of interest, either 
by government or individuals, is certain to increase 
many times the amount of penalty to be paid. To 
this direct penalty follows another still more dis- 
astrous. The inflation which government money 
always causes is always followed by a correspond- 
ing depression, which necessarily continues till the 
cause is removed. In the case of the United 
States, the period of inflation has long since passed. 
We are now suffering an annual loss equaling prob- 
ably the whole amount of greenbacks in circula- 
tion. The nation is held in chains which she has 
neither the sense to see nor the courage to throw 
off. She will soon be driven to take action. 
Whether this shall -be heroic and honorable the 
payment in some way of the debt which is now 
producing such consequences or outright repu- 
diation, is soon to be seen. The alternative can- 
not, nor will it, be long delayed. 


UPON the formation of the government, one of the 
earliest and most important measures engaging the 
attention of Mr. Hamilton, first Secretary of the 
Treasury of the United States, was the establish- 
ment of a mint, " to correct " to quote from his 
celebrated Report of 1791 "the immense disorder 
which already reigns in so delicate and important 
a concern [as the currency], and the still greater 
disorder which every moment is possible." The 
money in circulation, at the time, were coins from 
nearly every mint in the world ; the greater part, 
however, being those of Spain and her colonies, 
at that time the-chief source of the supply of the 
precious metals. A portion of the coins in circula- 
tion of different nationalities were, for a time, from 
the necessity of the case, made legal tender and 
receivable in the payment of the revenues. The 
greater part of the coins were largely reduced in 
value from wear, while the amount of pure metal 
they contained depended upon the regulation of 
each mint. In the establishment of a system for 
the new nation, the first thing to be considered was 



the relative value of the two metals to be used 
gold and silver so that, with the two, there should 
be but one standard ; the coins of each metal of 
similar denominations, or their multiples, to have 
equal values. In determining this point, it became 
necessary to decide upon the metal best fitted to 
serve as the unit to which the value of the other 
should be referred. Mr. Hamilton, with a sagacity 
which never failed him, at once adopted gold as 
having the most uniform value. "-That species of" 
(silver) " coin, the old piaster " (dollar) " of Spain " 
to quote further from his report of 1791 "has 
never had any settled or standard value according 
to weight or fineness, but has been permitted to cir- 
culate by tale, without regard to either, very much 
as a money of convenience, while gold has had a 
fixed price by weight, with an eye to its fineness. 
This greater stability of the value of the gold coins 
is an argument of force for regarding the money 
unit as having been hitherto virtually attached to 
gold rather than to silver. Twenty-four and sixth- 
eighths grains of fine gold have corresponded with 
the nominal value of the dollar in the several States, 
without regard to the successive diminutions of 
its " (the dollar) " intrinsic worth. * * * The 
nominal value of the dollar in each State corre- 
sponds also with 24.75 grains of fine gold, and with 
something between 368 and 374 grains of fine sil- 
ver. * * * As long as gold, either from its 
intrinsic superiority as a metal, from its greater 


rarity, or from the prejudices of mankind, retains 
so considerable a preeminence in value over silver 
as it has hitherto had, a natural consequence of 
this seems to be that its condition will be more 
stationary. The revolutions, therefore, which may 
take place in the relative value of gold and silver 
will be changes in the state of^ the latter rather 
than of the former." Much more might be quoted 
to the same effect. Enough has been given to 
show that Hamilton grasped the whole subject. 
Whatever has followed in this country up to 1853 
has been to confirm, what he sought to establish, a 
relation of the two metals according to their value, 
referring that of silver to that of gold as the more 
uniform, and consequently the proper unit and 
standard. After full investigation and deliberation, 
Hamilton adopted the ratio of I to 15; the gold 
dollar, or unit, to consist of 24.75 grains, and the 
silver dollar 371.25 grains of pure metal. 

The result speedily showed gold to have been 
undervalued in the coinage. Having a legal com- 
petency less than its bullion or market value, it 
was exported as fast as coined, leaving the country 
with but one metallic money silver. To remedy 
this mistake various propositions were from time to 
time submitted, the object being to retain gold in 
the country by equalizing its value with silver. 
" Gold " to copy from a report made in 1819 by a 
committee of the House of Representatives " can 
hardly be considered to form a material part of our 


money circulation for the past twenty-six years ; " 
that is, from the establishment of the Mint. Mr. 
Crawford, Secretary of the Treasury in 1820, re- 
commended that the ratio between gold and silver 
be established at I of the former to 15.75 of the 
latter. Nothing came, however, of his proposition 
and many others of the same kind, till 1834, when 
the relative value of the two metals was established 
by law at I of gold to 16 of silver, the pure metal 
in the gold dollar being reduced from 24.75 to 23.2 
grains to the dollar. A slight addition of value 
was made in 1837, by raising the amount of pure 
metal in the gold coins from 899.225 to 900.000 
fine. The avowed object of the advocates of a 
change in the relative coined value of the two 
metals was to bring gold into active circulation, 
and they determined to establish a rate that would 
effectually accomplish their purpose. Such was 
their strength that they carried their measure in 
the Senate by a vote of four to one, and in the 
House by a vote of five to one. 

As the ratio established by Mr. Hamilton over- 
valued silver, in consequence of which gold was 
driven from the country, the act of 1834 under- 
valued silver to the extent of about one and a half 
per cent., in consequence of which its coins were 
driven from the country, leaving in circulation only 
gold and debased foreign silver coins. To correct 
this mistake, Mr. Corwin, in 1852, then Secretary 


of the Treasury, called the attention of Congress to 
the consequences that had resulted. " So soon," 
he said, " as the state of our foreign commerce, as 
is now the case, requires the exportation of specie, 
it is obvious that our silver coin must be exported 
while it can be procured till the demand for expor- 
tation is supplied. * * * There seems to be 
but one immediate and direct remedy for this evil, 
and that is the one that has already been adopted 
in Great Britain, of changing the relative value be- 
tween gold and silver coin by reducing the intrinsic 
value of the latter. * * * This could be advantage- 
ously done by making the (silver) dollar weigh 384 
grains (in place of 412*^), and the smaller coins in. 
proportion. * * * If such a scale of weights 
were adopted, the relation of silver in such pieces 
to gold would be as 14.884 to I ; and if the present 
true relation of bullion value is about 15.675 to I, 
the new proposed silver coin would be overvalued 
by about five per cent. * * * If this plan is 
adopted by Congress, it, of course, will involve the 
necessity of making silver coin a legal tender only 
for debts of small amount, not say, exceeding ten 
dollars, which is about the same limit (forty shil- 
lings) which has been established in England" 

Pursuant to the recommendations of Mr. Corwin, 
Congress, in 1853, passed a law reducing the weight 
of silver, in coins of less denomination than one 
dollar, from the standard of 412.25 to 384 grains to 
the dollar, the half-dollar to weigh 192 grains, and 


the smaller coins in proportion ; the coins of less 
than one dollar not to be legal tender in payments 
exceeding five dollars at any one time. No change 
was made, at the time, in the amount of metal in the 
silver dollar, for the reason, to use the words of Mr. 
Hunter, of Virginia, who reported the bill estab- 
lishing the subsidiary coinage, that " the great meas- 
ure of adjusting the legal-tender ratio between gold 
and silver (as legal tender in unlimited amounts) 
cannot be safely attempted until some permanent 
relation between the market value of the two met- 
als shall be established." At that time the silver 
dollar, or rather the amount of metal in it, was at a 
premium in gold of 4.26 per cent., the premium hav- 
ing risen 1.69 per cent, from the previous year. Its 
price fluctuated rapidly, partly in consequence of 
the discoveries of gold in California and Australia. 
It was thought best, consequently, to await the 
permanent effect of these discoveries, before at- 
tempting to establish a relation that might have 
to be altered almost as soon as made. Congress 
could well postpone any action in reference to the 
relative value of the gold and silver dollar, for the 
reason that the latter, at the time, formed no part 
of the currency of the country, it having been taken 
up for export as bullion as fast as it came from 
the mint. The effect of the act of 1853, conse- 
quently, was to place the country effectually upon a 
mono-metallic basis as much so as if the silver dol- 
lar itself had been reduced to the position of a sub- 


sidiary coin, the only currency from our own mint 
in circulation being gold and the subsidiary silver 
coins of denominations of less than one dollar. That 
such was the intention of the act was fully shown 
by Mr. Dunham, of Indiana, Chairman of the Com- 
mittee of Ways and Means of the House, which re- 
ported the bill. In the course of his remarks in its 
support, he said : 

" Another objection urged against this proposed change \i.e., 
the reduction of the weight of the minor coins] " is, that it 
gives us a standard of currency of gold only. What advan- 
tage is to be obtained by a standard of the two metals, which 
is not as well, if not much better, attained by a single stand- 
ard, I am unable to perceive. * * * Wherever the exper- 
iment of a standard of a single metal has been tried, it has 
proved eminently successful. Indeed, it is utterly impossible 
that you should long at a time maintain a double stand- 
ard. * * * Gentlemen talk about a double standard of gold 
and silver as a thing that exists, and that we proposed to 
change. We have had but a single standard for the last three 
or four years. That has been, and now is, gold. We pro- 
pose to let it remain so, and to adapt silver to it, to regulate 
it by it," * 

* The silver dollar not only formed no part of the circulation 
from 1834, but it never, at any time, formed any considerable por- 
tion of it. Up to 1834 the whole number of silver dollars coined 
equaled only $1,439,517, the amount averaging only $45,000 
yearly. From the formation of the mint down to 1873 the total coin- 
age of silver dollars equaled only $8,045,838, against $816,905,879 
of gold, and $144,141,885 of smaller and subsidiary silver coins. 
From 1834 to 1873 the premium on silver dollars equaled, on an 
average, 2.25 ; the premium being the highest in 1859, 'when it rose 


From 1853 the laws relating to the coinage re- 
mained unchanged till 1873. In 1870 a commu- 
nication, under date of April 25th, was addressed 
by the Hon. Mr. Boutwell, then Secretary of the 
Treasury, to the Hon. Mr. Sherman, the Chair- 
man of the Committee on Finance of the Senate, 
inclosing a bill for the thorough revision of all the 
laws relating to the mint. Accompanying the bill 
was a report, prepared by Mr. J. J. Knox, then 
Deputy Comptroller of the Currency, presenting the 
reasons for the various provisions in the bill, one of 
which was the discontinuance of the silver dollar 
as one of the coins, for the reason that, in conse- 
quence of its excess of bullion over its nominal 
value, it had long ceased to be one of the coins in 
circulation in the country. On the 28th of April, 
the bill was referred to the Senate Committee on 
Finance, and a large number of copies ordered to be 
printed, with wide margins, and distributed among 
experts and persons whose opinions were regarded 
of value, in order to elicit the widest comment and 
criticism. Numerous replies were received, the 
purport of all being embraced in that of Dr. Lin- 
derman, Director of the Mint. * * * " It would be 
better, in my opinion," said Dr. Linderman, " to 
discontinue the issue of the silver dollar altogether 
[than to issue it at a reduced value, as a subsidiary 

to 5.22, and the lowest in 1843, when it fell to 0.34. In 1870, when 
the bill demonetizing silver was introduced, the premium stood at 
2.67, and continued at about such rate till the bill passed. 


coin]. The gold dollar is really the legal unit and 
measure of value. Having a higher value as bullion 
than its nominal value, the silver dollar long ago 
ceased to be a coin of circulation, and being of no 
practical use whatever, its use should be discon- 

On the 1 9th of December, 1870, the bill reported 
by the Senate Committee was taken up for dis- 
cussion, and on the 9th of January, 1871, was 
passed by the Senate substantially as originally re- 
ported. On the I3thdayof January, 1871, the bill, 
having gone to the House, was ordered to be 
printed. On the iQth of February following, Mr. 
William D. Kelley, Chairman of the Committee on 
Coinage of the House, reported the bill to that 
body, with an amendment in the nature of a sub- 
stitute, which agreed with the Senate bill in dis- 
continuing the coinage of the silver dollar. Mr. 
Kelley's bill was ordered to be printed and recom- 
mitted. On the 9th of March, 1871, Mr. Kelley 
again introduced the bill, which again was ordered 
to be printed, and again was referred to his com- 
mittee. On the Qth of January, 1872, the bill was 
again reported, with a recommendation that it pass. 
On the 9th of April, 1872, it was taken up and dis- 
cussed at great length. It was again taken up for 
discussion on the 27th of May, 1872, when an 
amendment was offered by Mr. Hooper, a member 
of the Coinage Committee, from Massachusetts, and 
adopted, that the silver dollar be retained as a sub- 


sidiary currency, its value being reduced to 384 
grains, the ratio of metal in the subsidiary coins, 
for the reasons, as stated by him in the debate, 
that " the silver dollar of 412^ grains, by reason of 
its bullion or intrinsic value being greater than its 
nominal value, long since ceased to be a coin of 
circulation, and is melted by manufacturers of 
silverware." Mr. Kelley, in the same debate, said : 
" It is impossible to retain the double standard. 
The value of gold and silver continually fluctuates. 
You cannot determine this year what will be the 
relative values of gold and silver next year. They 
were 15 to I a short time ago; they are 16 to I 
now. * * * I again call the attention of the House 
to the fact that gentlemen who oppose this bill in- 
sist upon maintaining the silver dollar, worth three 
and a half cents more than the gold dollar, and 
worth seven cents more than two half-dollars. So 
long as these provisions remain, you cannot keep 
silver in the country." 

The bill, as amended, passed the House on the 
27th of May, 1872. It was returned to the Sen- 
ate with the amendments, again printed, and re- 
ferred to the Committee on Finance, reported back 
on the 1 6th of December, 1872. After debate it 
was again referred to the committee, and printed 
with the amendments. On the 7th of January, 
1873, it was taken up for debate in the Senate, and 
finally passed by that body on the I7th of that 
month, the House amendment to the bill retaining 


the silver dollar as a subsidiary coin having been 
stricken out. As the House adhered to its amend- 
ment, the bill went to a committee of conference, 
by which the House amendment was stricken out, 
the bill making no provision for the coinage of .the 
silver dollar in any form. The report of the con- 
ference committee was accepted by both Houses, 
and on the I2th of February the famous bill of 
l %73> by the signature of the President, became 
a law. 

It will thus be seen that nearly three years 
elapsed from the introduction of the proposition 
demonetizing silver till its final passage. During 
this whole period every possible means were re- 
sorted to to give it publicity, and to invite what- 
ever opinion or criticism could aid in coming to a 
wise and temperate conclusion. It was during 
this whole time constantly and emphatically urged, 
by the Secretary of the Treasury. The bill was 
repeatedly considered at length by the Finance 
Committee of the Senate and the Coinage Commit- 
tee of the House, during five different sessions of 
Congress. It was repeatedly read in full in both 
Houses. It was printed in full, with the amend- 
ments, by order of Congress, eleven different times, 
and twice, in addition, in the reports made by the 
Deputy Controller of the Currency. The debates 
upon the bill in the Senate occupy sixty-six col- 
umns of the Congressional Globe, and those in the 
House seventy-eight columns. During the period 


every shade of opinion, both in and out of Con- 
gress, was invoked and challenged. Never was a 
measure more fully, intelligently, conscientiously, 
and exhaustively considered.* 

We have given a brief sketch of the coinage laws 
from the formation of the government, in order to 
show that, as far as the two metals are concerned, 
all measures had one object an equality of value 
between the two ; that the act of 1853, which pro- 
vided the conditions by which alone the coins of 
silver to be issued in the future could be retained 
in the country, not the act of 1873, was the one 
that placed the nation on a mono-metallic basis 
of gold; that the act of 1873 produced no change 
in the financial condition of the country. That this 
was not devised by the rich as a cunning and cruel 
method of oppressing the poor by increasing the 
amounts to be paid by them, is sufficiently shown 
by the fact that it substituted the lowe* standard in 
place of the higher. The measure, consequently, 
if it had any design of the kind, was conceived 
wholly in the interest of the poor against the rich. 
It. had no other design than to adapt the currency 
to the convenience and wants of the country, the 
dropping out of the silver dollar being one of the 
least important of the measures to be accomplished. 

*For a series of exhaustive and valuable articles upon the coin- 
age of the United States, by Edward Stanwood, of the Boston 
Advertiser, see Banker's Magazine for April, May, and June, 1878. 


In all the discussions in Congress, and in all the 
public documents having reference to the subject 
of coinage, from 1791 to 1853, the great theme was 
equalization of the values of gold and silver, so 
that with two metals there should, on account of 
their value, be no choice in the matter of stand- 
ard. All attempts to secure such a result, however, 
signally failed. From 1792 to 1834 the nation 
was upon one basis silver; from 1834 to 1853 it 
was upon one basis gold. By the act of the lat- 
ter year, the first attempt was made to strike at 
the root of the evil by subordinating silver to 
gold, by reducing the value of the former nearly 
seven per cent., and by restricting the legal compe- 
tency of coins in circulation to payments not ex- 
ceeding five dollars at any one time. The act of 
1873 produced no change but to drop an obsolete 
provision from the statute-book. If the former 
proceeded from an upright purpose and was benefi- 
cent in its results, then the same may be emphat- 
ically asserted of the latter. If complaint was ever 
to be made, it should have been made of the act of 
1834, which effectually demonetized silver, at the 
same time it left the country with nominally two 
standards. But that act has always been regarded 
as highly advantageous, for the reason that it led 
to the ultimate adoption of the gold standard, 
leaving it to the future to provide a subsidiary one 
of silver when the necessity therefor should be 
seriously felt. When the act of 1853 was passed a 


large number of gold dollars were in circulation, a 
form of currency far more convenient than silver 
dollars ; so that if there had been any necessity of 
coins of such denomination, this was already fully 
met. When the act of 1873 passed, not the slight- 
est necessity was felt for dollars of either metal, 
from the abundance of paper money of a similar 
denomination, a far more convenient kind of cur- 
rency than a metallic one. Not the slightest need 
has ever been felt for the silver dollar, nor would its 
restoration ever have suggested itself to a single 
person in the country, had the relative value of the 
two metals been maintained. The suggestion of the 
great wrong done in demonetizing it only came 
when it was seen that its value had fallen some ten 
per cent. It was then believed that by remonetiz- 
ing it debts of all kinds could be scaled down in 
equal ratio. Hence the hypocritical howl of indig- 
nation, and the charge that the act of 1873 was the 
result of a conspiracy of the rich against the poor, 
to deprive the latter of their proper currency, as 
a means of increasing their burdens ; and, by the 
same means, the gains of the former. Never was 
there a more gratuitous and false assumption. 
To cover its iniquity and to secure the desired re- 
sult, every possible effort is now made to create a 
war of classes, to array labor against capital, the 
employed against the employer efforts which now 
threaten the most disastrous results.* 

* The act of Febuary 2ist, i878,remonetizing the silver dollar, pro- 


In the demonetization of silver, the United 
States followed, from a similar reason, the example 
of England, an example which, for the same rea- 
son, is being followed by all other great commercial 
countries. England, as was natural, took the lead, 


vided that there shall be coined, at the several mints of the United 
States, silver dollars of the weight of 412^ grains troy of standard 
silver, as provided in the act of January i8th, 1837^ on which shall be 
the devices and the superscriptions provided by said act, which 
coins, together with all silver dollars heretofore coined by the . 
United States of like weight and fineness, shall be a legal tender, at 
their nominal value, for all debts and dues, public and private, ex- 
cept where otherwise expressly stipulated in the contract. And the 
Secretary of the Treasury is authorized and directed to purchase ' 
from time to time silver bullion, at the market price thereof, not less 
than $2,000,000 worth per month, nor more than $4,000,000 worth 
per month, and cause the same to be coined monthly, as fast as so 
purchased, into such dollars ; and a sum sufficient to carry out the 
foregoing provision is hereby appropriated out of any money in the 
Treasury not otherwise appropriated. And any gain or seigniorage 
arising from this coinage shall be accounted for and paid into the ' 
Treasury, as provided under existing laws relative to the subsidiary 
coinage ; Provided, That the amount of money at any one time in- 
vested in such silver bullion, exclusive of such resulting coin, shall 
not exceed $5,000,000 ; And provided further. That nothing in this 
act shall be construed to authorize the payment in silver of certifi- 
cates of deposit issued under the provisions of section 254 of the 
Revised Statutes. 

The second section of the act provided for inviting the countries 
composing the Latin Union France, Italy, Switzerland, and Bel- 
gium which had entered on an arrangement in reference to their 
coinage, and other European nations, to a conference, for the pur- 
pose of establishing, internationally, a relation of value between gold 
and silver, and a bi-metallic basis for the world. 

The third section provided that ' ' any holder of the coin authorized 


for the reason that she long surpassed all nations in 
the extent of her manufacturing and commercial 
enterprises. With her increased wealth, gold be- 
came the more convenient solvent of transaction 
than silver. This is the sole reason for the change 

by this act may deposit the same with the Treasurer or any Assistant 
Treasurer of the United States, in sums not less than <$io, and re- 
ceive therefor certificates of not less than $10 each, corresponding 
with the denominations of the United States notes. The coin de- 
posited for or representing the certificates shall be retained in the 
Treasury for the payment of the same on demand. Said certificates 
shall be receivable for customs, taxes, and all public dues, and, 
when so received, may be reissued." 

This bill received the veto of the President, in the course of which 
he said : " If it is now proposed, for the purpose of taking advan- 
tage of the depreciation of silver in the payment of debts, to coin 
and make a legal tender a silver dollar of less commercial value 
than any dollar, whether of gold or paper, which is now lawful 
money in this country, such a measure, it will be hardly questioned, 
will, in the judgment of mankind, be an act of bad faith as to 
all debts heretofore contracted. The silver dollar should be made 
a legal tender only at its market value. The standard of value 
should not be changed without the consent of both parties to 
the contract. National promises should be kept with unflinching 
fidelity. There is no power to compel a nation to pay its just 
debts. Its credit depends on its honor. The nation owes what it 
has led or allowed its creditors to expect. I cannot approve a bill 
which, in my judgment, authorizes the violation of sacred obliga- 
tions. The obligation of the public faith transcends all questions of 
profit or public advantage. Its unquestionable maintenance is the 
dictate as well of the highest expediency as of the most necessary 
duty, and should ever be carefully guarded by the Executive, by Con- 
gress, and by the people. It is my firm conviction that if the coun- 
try is to be benefited by a silver coinage, it can be done only by the 
issue of silver dollars of full value, which will defraud no man. A 


from a double to a single standard in that country. 
The latter was legally established in 1816, although 
gold for a long time had been the metal chiefly in 
use. So early as 1805, Lord Liverpool, in his cele- 
brated letter to the king on the "Coins of the 
Realm, " urged with convincing force that the 
coins which are the principal measure of property 
should be of one metal only, and that that metal 
should be gold, being the metal in which the prin- 
cipal payments had been made for the last hun- 
dred years. 

An illustration still more striking than that afford- 
ed by England of the revolution in the use of gold 
and silver as money, due to the requirements of an 
enlarged commerce, and in accordance with the 
spirit of the age, is that afforded by France. That 
country has been regarded as especially the cham- 
pion of the silver interest, and her example con- 
stantly appealed to as an argument in favor of the 
remonetization of silver in our own. So far from 
affording any argument of the kind, her action, for 
the last 27 years, presents the strongest possible rea- 
son against it. Up to 1850 the coinage of France 
had been almost wholly of silver. From 1795 to 

currency worth less than it purports to be worth will in the end de- 
fraud not only creditors, but all who "are engaged in legitimate busi- 
ness ; and none more surely than those who are dependent on their 
daily labor for their daily bread." 

The bill receiving the votes of two-thirds of the members of each 
House, became a law, notwithstanding the veto of the President. 


1850, its total coinage of gold equaled 172,752,000 
francs ; of silver, 4,204,366,000 francs. From 1850 to 
1876 inclusive, the coinage of gold equaled 8,074,- 
900,000 francs; of silver, 1,046,112,000 francs. 
For the period first named (55 years), the excess of 
the coinage of silver over gold equaled 4,031,614,- 
ooo francs ; for the latter period of 27 years, the ex- 
cess of coinage of gold over silver equaled 7,028,- 
788,000 francs. In 1850, the reserves of the Bank 
of France, amounting to 458,780,000 francs, con- 
sisted of 11,980,000 of gold and 446,800,000 silver. 
On the 23d of June, 1876, the coin reserves of the 
Bank, amounting to 2,049,598,000 francs, consisted 
of 1,463,400,000 of gold and 586,198,000 of silver. 
In 1850, the proportion of gold reserves equaled 
about 2}/2 percent, of the whole. In 1876, it equal- 
ed about 75 per cent, of the whole. 

To what was this mighty revolution due ? Sim- 
ply to the vastly increased wealth of the nation, 
and to a wise adaptation of means to ends. Silver is 
no- longer the convenient standard for that country, 
which has, consequently, for some time past wholly 
ceased coining it. The problem before that coun- 
try in which, whatever the reason, the amount of 
metallic currency in circulation far exceeds that in 
any other, was the substituting gold for silver, and 
discharging the latter from a function which it so 
long exercised,- rone involving very grave difficul- 
ties, and requiring very great wisdom and steadi- 
ness of purpose in surmounting them. The pre- 


ceding statement shows how vast the progress that 
has already been made. France had, and still has, 
large sums of silver to be disposed of. The amount 
of metallic money in it, in 1873, was estimated by 
the best authorities at 5,500,0x^0,000 francs, of 
which 4,000,000,000 consisted of gold and 1,500,- 
000,000 of silver. There is probably 1,500,000,000 
less silver in the country than there was in 1850; 
while the amount of gold in it has been almost 
wholly accumulated since that time. The Bank 
of France long postponed resumption, after its 
suspension in 1870 from the complications grow- 
ing out of the German war, in order to be in 
a position to deal with the question before the na- 
tion in a more independent manner than it could 
do were it constantly exposed to attack from the 
holders of its notes. At no time, however, were its 
notes at any considerable discount. Their average 
depreciation for 1873 equaled only three-quarters 
of I per cent. They were at the par of gold 
through the whole of 1875, 1876, and 1877, the Bank 
formally resuming January 1st, 1878. Those requir- 
ing gold in their business operations could always 
get it ; at the same time the Bank reserved for itself 
the right to pay it or not, to suit its ideas of what 
was due to the relations it sustained to the great 
problem which was being worked out for the whole 

* The following statement will show the average amount in 


The third great commercial country of Europe, 
Germany, has accomplished a more complete rev- 
olution than France in her monetary system. Im- 
mediately upon the close of the war in 1870, 
Germany entered upon the reformation of its cur- 
rency, which then consisted chiefly of silver, the 
object being to establish one standard gold, sil- 

dollars of notes in circulation, and of coin reserves, of the Bank of 
France for the past five years : 

Notes. Coin Reserves. 

1873 $568,000,000 $157,000,000 

1874 542,000,000 197,000,000 

1875 507,000,000 314,000,000 

1876 499,000,000 368,000,000 

1877 511,000,000 435,000,000 

The following statement will show the amount of notes of differ- 
ent denominations in circulation on the 3ist of January, 1877, and 
on the 25th of January, 1876. 

Jan. 3ist, 1877. Jan. 25th, 1876. 

Notes of Francs. Francs. 

5,000 45,000 30,000 

1,000 1,412,820,000 1,110,123,000 

500 366,924,500 241,868,000 

200 649,000 682,000 

loo 684,648,600 1,189,864,000 

50 32,545,200 100,138,250 

25 824,650 995,250 

20 12,541480 26,025,180 

5 1,093,820 1,288,620 

Old notes 437, 500 443,000 

Total 2,512,529,750 2,671,727,000 

It will be seen that the whole amount of notes in circulation of 
less amount than 50 francs, or 10 dollars, equaled, January 


ver to take the place of subsidiary coins. In 1871, 
it announced that the law for the demonetization 
of silver would take effect January 1st, 1876. At the 
end of March, 1878, the whole amount of old coins 
withdrawn equaled 1,061,000,000 marks (of 23.8 
cents each), of which 91,000,000 marks were of 
gold, and 970,000,000 of silver. The government 
estimates that 5,000,000 pounds of silver, equaling 
320,000,000 marks, or $75,000,000, are still to be 
taken in. The total amount of new money coined 
equaled 2,005,200,000 marks, of which 1,579,700,- 
ooo were of gold, and 425,500,000 marks of silver; 
the subsidiary silver coins being only about one- 
fifth of the whole. 

From what has preceded, it will be seen that the 
final demonetization of silver by the United States, 
in 1853 and 1873, was an act fully in harmony with 
the policy of all great commercial nations as well 
as the dictates of convenience and common sense. 
Never before in this country, and never before in 
any other, was the subject of coinage made the oc- 
casion of dividing the people into two great hostile 

1877, only the aggregate of 14,897,450 francs, or $2,979,490. The 
absence of small notes in France is one of the reasons for its enor- 
mous amount of metallic money. In this country almost the whole 
amount of government and bank notes in circulation consists of 
notes of $10 or under. In England no notes are in circulation of 
less amount than 5 ; but in that country every one in business 
keeps an account with a bank or banker, and makes payments by 
checks drawn for any sum. 


camps; nor has it been before suggested that a 
coinage of one metal was appropriate to the poor, 
and that that of another was appropriate to the 
rich. As well might it be urged that one system 
of weights .and measures was appropriate to the 
rich, who could buy in gross, and another to the 
poor, whose means would only allow them to buy 
piece by piece. But measures with which the rich 
buy are divided off into parts precisely as are those 
used by the poor. But it is useless to waste time 
upon a question like this, the answer to which is 
palpable to all not blinded by interest or passion. 

It is always to be remembered that gold and silver, 
as money, are, in ratio to their value, always equally 
costly in acquisition and maintenance. A dollar's 
worth of gold will always command a dollar's worth 
of silver, and a dollar's worth of silver will always 
command a dollar's worth of gold. The monetiza- 
tion of silver will add not a single dollar to the 
metallic or paper money in circulation. It will 
rather diminish it, as with the use of inferior instru- 
ments of production and distribution the general 
result will be less. From 1851 to 1860 inclusive, 
the country was practically upon a mono-metallic 
basis, there being no legal-tender silver dollars in 
circulation, the few coined having been exported 
at their bullion value. That there was no want of 
metallic money, of any kind, during this period is 
shown by the fact that within it the excess of ex- 


ports over imports of coin equaled $417,742,000; 
the former equaling $495,112,000, the latter, $77,- 
588,000; the exports exceeding *the imports by 
$41,764,200 annually. During the same period 
the coinage at the mint of the United States 
equaled $378,000,000, more than three-fourths of 
which must have been exported. The total issue 
of legal-tender silver dollars in this period, the 
coinage of which was entirely free, equaled $1,154,- 
190 ; of gold, $330,263,000 ; of subsidiary silver 
coins, $46,583,000. Why was not a larger amount 
of the gold and silver produced in the country re- 
tained in it ? Simply for the reason that it was 
more for its interest to export than to retain them. 
After all the export, there was a plenty left. The 
period referred to was one of unexampled pros- 
perity. Not a dollar more of coin would have re- 
mained in the country, had the coinage been equal- 
ly divided between the two metals, while great in- 
convenience and loss would have resulted from 
any attempt 1;o force an equal circulation of the 

The necessary effect of the remonetization of 
silver, at a value 10 per cent, less than its bullion 
value, will be to give us but one standard, and that 
differing wholly from that of the country (England) 
through which all our remittances and payments 
to foreign countries have to be made. The stand- 
ard of England is practically that of all commercial 


countries. All our money shipped to that country 
will not be money there, but merchandise, to be 
converted into money before payment can be made. 
For such purposes, silver would not necessarily have 
any preference over pork or flour. It would con- 
stantly fluctuate, like these articles, so that an 
American merchant engaged in foreign trade could 
never tell how he stood, or the amount of means 
necessary for the payment of his debts. The very 
fact that these were to be paid at a certain day, 
and that a large amount of silver, the money of his 
own country, but of no other with which he was 
dealing, was to be thrown upon a foreign market, 
would exert a powerful influence in aggravating the 
fluctuations in price to which it was ordinarily sub- 
ject. A standard of value for ourselves differing 
from that of other nations will have the effect to 
throw us out of relations with all. Our whole 
commerce with them will then be in the form of 
barter, with all the isolation which this implies. 
We shall at once take a subordinate position in ref- 
erence to all, and this, too, at the very moment 
when our own, with other nations, is laboring so 
persistently and earnestly to unite all in closer 
bonds by a system of coinage and a standard 
common to all. 

Another and sufficient objection to the use of 
silver as a standard of. value, is the violent fluctu- 
ations in its value. Its value in England, from 1833 


to 1873, averaged about 6o^/., the standard ounce; 
the lowest price being 57^^. in 1846, the highest 
62i/d. in 1858. Prices in this country necessarily 
correspond with the prices in England. The fluctu- 
ations considerably exceeded I per cent, annually. 
Had silver been the standard, such fluctuations, 
slight as they were, would have been productive 
of great disturbance and loss. After 1872, the 
fluctuations became much more rapid and excessive. 
Within a period of 30 consecutive days, in the 
latter part of May and the ist of June, 1876, silver 
fell from 52^. to 46^^. the ounce, the degree of fall 
equaling n per cent. Had silver been the stand- 
ard, and had the fall been a permanent one, the 
purchasing power of the whole paper money of the 
kingdom, equaling $2,750,000,000, would have fallen 
in like ratio, the aggregate decline equaling $300,- 
000,000. Such a fall could not have taken place 
without carrying bankruptcy and ruin throughout 
the land. As it was, the decline of value, being 
that of but one article of merchandise (silver 
bullion probably" not exceeding in amount the sum 
of $60,000,000), was not more than $6,600,000. The 
difference between the highest and lowest price of 
silver throughout the year equaled nearly 21 per 
cent., the range being between 58^^. and 46%^. 
Had a corresponding decline in the purchasing 
power of the paper currency of the kingdom taken 
place, the amount would have equaled $577,500,- 
ooo! Of course, the theoretical effect, where the 


price was constantly fluctuating, would not be fully 
realized ; but it would be realized to a degree 
sufficient to disorganize all kinds of industry and 
trade, producing an incredible amount of disturb- 
ance and loss. 

The amount of the paper money of this country, 
including notes and deposits of banks, and exclud- 
ing government money, equals $1,250,000,000. The 
fall of I per -cent, in the value of the standard 
would cause a corresponding fall in the paper cir- 
culation of the country. If there were $300,000,000 
of silver coin constituting our standard, a fall equal 
to i per cent, of it would reduce the purchasing 
power of the whole currency of the country by 
$15,500,000. The difference between the highest 
and lowest prices of silver for each month in 1876, 
in London, and consequently in this country, 
equaled 27 points, the aggregate equaling very 
nearly 50 per cent, of the value of the metal. Were 
the daily variations calculated, the total fluctua- 
tions for the year would amount to far more than 
the price of the metal itself. In 1858 the silver dol- 
lar of the United States was at apremiuiri of 3.95 in 
gold ; in 1859, a * a premium of 5.22 ; in 1860, at a 
premium of 4.58 ; and in 1861, at a premium of 3.00. 
Its fluctuations, long before the recent decline was 
even anticipated, proved it to be wholly unfit to 
serve as the standard of value. How much less is 
it fitted to be the standard since the tremendous 
fluctuations that have occurred in it since 1873 ! 


The great sufferers from a depreciated and fluc- 
tuating currency are always laborers for wages ; a 
class which composes a large majority of the citi- 
zens of this country. They are the chief sufferers 
by the Silver bill. As the purchasing power of 
the new money is reduced 10 per cent., their wages 
will be reduced 10 per cent. As the nominal rate 
of their wages will long remain unchanged, the 
rates of compensation will be correspondingly re- 
duced. In time they may get some relief, but only 
by demonstrating that they can no longer subsist 
on their reduced compensation. Whatever the 
disturbance and disaster to follow the remonetiza- 
tion of silver, they will be the first to feel the ef- 
fect. They have no mode of escape. They can- 
not well change their places or occupations, but 
must toil on, as best they can, through all the 
calamities that befall them. The products of their 
labor, when gathered up into the great reservoirs, 
constitute the capital of the United States. Upon 
them, in fact, rests the great fabric of society. To 
every one of them the monetization of silver is 
an unmitigated evil. The difference between the 
nominal and the real value of the coins, their labor 
must in great measure make up. 




THE first legal-tender money issued on a large 
scale, of which we have any detailed account, 
was issued, as might be expected from the priority 
of its civilization, in Asia: 

" The issue of paper money in China," says Colonel Yule, in 
his edition of " Marco Polo's Travels,"* " is at least as old as 
the beginning of the ninth century. In 11 60, the system had 
gone to such excess that government paper equivalent in nomi- 
nal value to 43,600,000 ounces of silver had been issued in six 
years, and there were local notes besides, so that the empire 
was flooded with rapidly depreciating paper. 

" The ' Kin ' or ' Golden ' Dynasty of Northern invaders who 
immediately preceded the Mongols took to paper, in spite of 
their title, as kindly as the native sovereigns. Their notes 
had a course of seven years, after which new notes were is- 
sued to the holders, with a deduction of fifteen per cent." 

To the " Kin " or " Golden " Dynasty succeeded 
that of the Mongols, of whose paper money we have 

* " Marco Polo's Travels," edited by Colonel Yule, vol. i. , p. 380. 
John Murray, London, 1871. 




the following account, taken from the 24th chapter 
of Marco Polo's narration. Polo spent a consider- 
able portion of the period from 1275 to 1291 at the 
court of Kublai Khan, and was in a position to be 
fully informed of the financial system of the great 
empire : 

" Now that I have told you in detail of this splendor of the 
city of the Emperor, I shall proceed to tell you of the Mint 
which he hath in the same city, in the which he hath his mon- 
ey coined and struck, as I shall relate to you. * * * The 
Emperor's Mint, then, is in this same city of Cambaluc (now 
Peking); and the way it is wrought is such that you might say. 
he hath the Secret of Alchemy in perfection, and you would 
be right ! For he makes his money after this fashion. 

" He makes them take of the bark of a certain tree, in fact 
of the mulberry-tree, the Leaves of which are the food of the 
silkworm. * * * What they take is a certain fine white 
bast, or skin, which lies between the wood of the tree and the 
thick outer bark, and this they make into something resem- 
bling sheets of paper, but black. When these sheets have been 
prepared, they are cut up into pieces of different sizes. The 
.smallest of these sizes is worth a half tornesel; the next, a 
little larger, one tornesel; one, a little larger still, is worth 
half a silver groat of Venice; another, a whole groat; others 
yet, two groats, five groats, and ten groats. There is also a 
kind worth one Bezant ($10) of gold, and others of three Be- 
zants, and so up to ten. All these pieces of paper are issued 
with as much solemnity and authority as if they were of pure 
gold or silver; and on every piece a variety of officials, whose 
duty it is, have to write their names, and to put their seals. 
And when all is prepared duly the chief officer deputed by 
the Khan smears the seal intrusted to him with vermilion, 
and impresses it on the paper, so that the form of the seal re- 


mains stamped upon it in red; the money is then authentic. 
Any one- forging it would be punished with death. And the 
Khan causes every year to be made such a vast quantity of 
this money, which costs him nothing, that it must equal in 
amount all the treasure in the world. 

" With these pieces of paper, made as I have described, he 
causes all payments on his own account to be made; and he 
makes them to pass current universally over all his kingdoms 
and provinces and territories, and whithersoever his power 
and sovereignty extend. And nobody, however important 
he may think himself, dares to refuse them on pain of death. 
And indeed everybody takes them readily, for wheresoever a 
person may go throughout the great Khan's dominions, he 
,shall find these pieces of paper current, and shall be able to 
transact all sales and purchases of goods by means of them 
just as well as if they were coins of pure gold. And all the 
while they are so light that ten Bezants' worth does not weigh 
one golden Bezant. 

" Furthermore all merchants arriving from India or other 
countries, and bringing with them gold or silver or gems and 
pearls, are prohibited from selling to any one but the Em- 
peror. He has twelve experts chosen for this business, men 
of shrewdness and experience in these affairs; these appraise 
the articles, and the Emperor then pays a liberal price for, 
them in these pieces of paper. The merchants accept his 
price readily, for, in the first place, they would not get so good 
an one from anybody else, and, secondly, they are paid with- 
out any delay. And with this paper money they can buy 
what they like anywhere over the Empire, whilst it is also 
vastly lighter to carry about in their journeys. And it is a 
truth that the merchants will several times in the year bring 
wares to the amount of 400,000 Bezants, and the Grand Siri 
pays for all in that paper. So he buys such a quantity of those 
precious things every year that his treasure is endless, whilst 
all the time the money he pays away costs him nothing at all. 



Moreover, several times in the year, proclamation is made 
throughout the city that anyone who may have gold or silver, 
or gems or pearls, by taking them to the Mint shall get a 
handsome price for them (in his notes). And the owners are 
glad to do this, because they would find no other purchaser 
give so large a price. Thus the quantity they bring in is 
marvelous, though those who do not choose to do so may let 
it alone. Still, in this way, nearly all the valuables in the 
country come into the Khan's possession. 

" When any of these pieces of paper are spoiled not that 
they are so very flimsy either the owner carries them to the 
Mint, and by paying three per cent, on the value he gets new 
pieces in exchange. And if any baron, or any one else so- 
ever, hath need of gold or silver, or gems or pearls, in order 
to make .plate, or girdles, or the like, he goes to the Mint and 
buys as milch as he list, paying in this paper money. 

" Now you have heard the ways and means whereby the 
Great Khan may have, and in fact has, more treasure than 
all the kings in the world ; and you know all about it, and the 
reason why." 

" Pauthier," says Colonel Yule, " has given, from the Chinese 
-Annals of the Mongol Dynasty, a complete Table of the Issues 
of paper money during every year of Kublai's reign (1260- 
1294), estimated at their nominal value in Ting, or tens of sil- 
ver ounces. The lowest issue was in 1267, of 228,960 ounces, 
which at the rate of nod. to the ounce equaled ,572,400, 
and the highest was in 1290, viz., 50,002,500 ounces, equiva- 
lent at the same estimate to $125,066,250, whilst the total 
amount in the 34 years was 249,654,290 ounces, or $624,135,- 
720 in nominal value. Well might Marco speak of the vast 
quantity of such notes that the Great Khan issued annually!"* 

So much for the legal-tender money of the Great 
* Yule's Marco Polo, vol. i., p. 378. 


Mogul, Kublai Khan, from which our own is faith- 
fully copied. Its circulation was enforced by pen- 
alties somewhat more rigid than those by which we 
seek to enforce that of our own. We may refuse 
to receive our money, perhaps at the risk of starva- 
tion ; but the Mongols could not refuse theirs with- 
out the loss of their heads. It is probable, however, 
that the money of each was equally current, as in 
both countries every one would be glad to get it at 
a price. The same formality obtained in both in 
the mode of its attestation and issue. In both, the 
State for Kublai Khan, long before Louis XIV. was 
born, and with far more reason, uttered the kingly 
maxim, "L'litat c'est moi" issued whatever it re- 
quired. The fancies of the Khan ran to gems and 
gold as well as to approved munitions of war.* 
Merchants undoubtedly had a good thing in the 
money, as they could sell their treasures with very 
little higgling, for the Khan could well pay a good- 
round price using that which cost him nothing, 
while they could pay a good round price for what- 
ever they wished to purchase ; the people having 

* Kublai Khan, with his untold treasures, got by his paper money, 
undoubtedly sat as the original of Milton's famous picture of Satan. 
Milton in his earlier days spent a considerable time in Italy, and 
must have been well read in the works of the great traveler. 
" High on a throne of royal state, which far 
Outshone the wealth of Ormus and of Ind, 
Or where the gorgeous East, with richest hand, 
Showers on her kings barbaric pearl and gold, 
Satan exalted sat." 



about the same choice in taking the money as a 
defenseless traveler has in refusing his, when de- 
manded by a dozen resolute footpads. The oc- 
casion of the issue of an enormous sum, equaling 
$125,006,250, in one year, was probably a "Black 
Friday," the work of some Mongol speculator (for 
human nature is not confined to races or political 
boundaries). Some tender-hearted man, a dear 
lover of his kind, was probably " Secretary of the 
Treasury," and undoubtedly sought to assuage the 
shock by a bounteous issue of money. The amount 
put out during Kublai Khan's reign was fairly plen- 
tiful, equaling about $20,000,000 annually, and fully 
proved him to be a man of the people. His ear 
was always open to the cry of distress. Were he 
President of the United States, with the power he 
possessed in his own country, the outraged South 
and West would not long have to wait the full 
gratification of their most just and ardent desires. 

" The Ming Dynasty," continues Colonel Yule, " for a 
time carried on the system of paper money ; with the dif- 
ference that, while under the Mongols no other currency had 
been admitted, their successors made payment in notes, but 
accepted only hard cash from their people ! In 1448 the 
chao of 1,000 cash was worth but 3 ! '' 

The difference between the Mongol and the 
Ming dynasties certainly cannot be urged in favor 
of the latter. The Mongols did not set themselves 
up as better than other people. The money that 
was good enough for the ruled was good enough 


for the ruler. Indeed, of what use could gold and 
silver be as money when they had a plenty of 
paper, " backed by all the wealth of the empire 
horses, cattle, and lands, as well as the gold and 
silver " ? The greater certainly included the less. 
That of the Mongols was Mr. Butler's ideal money: 
a plenty for the country, while not a dollar would 
circulate in any other ! The stream was always 
full. Modern " balance of trade " never reduced 
its majestic current. The Mings, on the other 
hand, were " genuine gold worshipers," " bloated 
bondholders," " remorseless Eastern capitalists," 
paying, or contracting to pay, in paper, but accept- 
ing nothing but gold ! Indeed, their action in prac- 
tically demonetizing, by refusing to receive, paper 
money, was the cause of its falling so low ; just as 
silver fell after its fraudulent demonetization in 
1873, due to the odious moneyed oligarchy ! 

" Two notable and disastrous attempts," continues Colonel 
Yule, " to imitate the Chinese system of currency took place 
in the Middle Ages : one of them in Persia, apparently in 
Polo's very presence ; the other in India, some thirty-six years 

" The first was initiated, in 1294, by Kaikhatu Khan, when 
his own and his minister's extravagance had emptied the 
treasury, on the suggestion of a financial officer (Secretary 
of the Treasury), called Izzuddin Muzaffar. The notes were 
direct imitations of Kublai's, even the Chinese characters 
being imitated as part of the device upon them ; the Chinese 
name chao was applied to them ; and the Mongol resident 
at Tabriz, Pulad Chingsang, was consulted in carrying out 


the measure. Expensive preparations were made for this 
object ; offices, called Chao-Khanahs (Sub-Treasuries), were 
erected in the principal cities of the provinces, and a numerous 
staff appointed to carry out the details. After the constrained 
use of the chao for two or three days Tabriz was in an uproar; 
the markets were closed ; the people rose and murdered 
Izzuddin; and the whole project had to be abandoned." 

The Tabrizzians were certainly the most singular 
people the world has yet seen ; and, judged by our 
own standard, and by the laws of money laid down 
in the books, stood greatly in their own light. 
Why should they not have accepted a money which 
every writer upon the subject has pronounced to be 
as good as gold and silver, provided only that it did 
not exceed the amount of gold and silver it dis- 
placed? Why did they not use this lighter, more 
portable, and more convenient money, sending off 
their gold and silver as merchandise to other coun- 
tries? As their example stands alone in history, 
influences must have been at work of which Marco 
Polo gives no account, though he was at the time 
at the court of Kaikhatu Khan. These influences 
were undoubtedly the work of base and malevolent 
" Eastern capitalists," who could not bear to see 
the poor people come so easily into the possession 
of money which threatened to rival and supplant 
their own, heaped up with such infinite patience 
and toil. They undoubtedly poisoned the pub- 
lic mind against the new money. Pulad Ching- 
sang, to whom this matter was intrusted at Tabriz, 


should have played his cards more skillfully. We 
do things better at Washington. Our Secretary of 
the Treasury makes everything even by the skillful 
application of a wise " equivalency," so that the 
people will not give a fig for the choice between 
gold, silver, and paper. The want of such an 
" equivalency " was the rock upon which Pulad 
Chingsang made shipwreck of his reputation ; and 
the " Secretary of the Treasury," Izzuddin Muzaf- 
far, came to an untimely end. The failure of this 
scheme is the more singular as Kaikhatu Khan was 
a nephew of the great Kublai, and had the benefit 
of the example and instruction of his illustrious, 
benevolent and far-sighted uncle. 

" The other like enterprise," to quote from Colonel Yule, 
" was that of Sultan Mahomed Tughlak of Delhi, in 1330-31. 
This also was undertaken for like reasons, and was in^pro- 
fessed imitation of the Chao of Cathay. Mahomed, however, 
used copper tokens, instead of silver, the copper being made, 
apparently, of equal weight to the gold or silver coin which 
it represented. The system seems to have had a little more 
vogue than at Tabriz, but was speedily brought to an end by 
the ease with which forgeries, on an enormous scale, were 
practiced. The Sultan, in hopes of reviving the credit of his 
currency, ordered that every one bringing copper tokens to 
the treasury should have them cashed in gold or silver. The 
people, who in despair had flung aside their copper coins like 
stones and bricks in their houses, all rushed to the treasury 
and exchanged them for gold and silver. In this way the 
treasury soon became empty, but the copper coins had as 
little circulation as ever, and a very grievous blow was given 
to the State." 


It must be regarded as unfortunate that our 
" Secretary of the Treasury" did not hold, under 
Sultan MahomedHjI'ughlak, the position he now holds 
at Washington ; or rather, that Tughlak's secretary 
had not had some prescience of the methods by 
which our Secretary is going to accomplish results 
precisely similar to those in vain attempted by 
Tughlak, or his " Secretary of the Treasury." The 
latter should never have attempted to thrust reck- 
lessly upon the people his copper coinage at the 
par of gold. Gentle methods are far more power- 
ful than the thunderbolt itself. The new coins, as 
fast as they came from the mint, should never have 
seen daylight, but should have been stowed away 
in some snug corner of the treasury, and certificates 
issued therefor in the following fashion : 

No. 13,333. 10,000 Chao. 

This certificate represents 10,000 copper chao, coined at 
the value of gold, and every whit as good ; and is payable to 
bearer on demand. It is also receivable at the par of gold in 
payment of the revenues. 

(Signed,) JOHN ALADDIN. 

Secretary of the Treasury. 
I Moharrem, 749." 

This would have done the business, for who 
could have wanted gold when copper certificates 
would have answered every purpose of gold? 
Had our Secretary lived some six hundred years 
ago, he might, by putting his certificate method so 


early in practice, have revolutionized history by 
changing the face of the world. For want of this, 
Tughlak failed in a most excellent scheme, came 
within an ace of losing his head, inflicted a grievous 
and lasting blow upon his State, and checked, per- 
haps for centuries, the progress of mankind. 

The end of Kublai Kahn's money may be easily 
told. When he paid his great debt to nature, 
he paid, at the same time, all lesser ones. 

In reference to the note, a fac-simile of which is 
given as a frontispiece, Colonel Yule says : 

" I have never heard of the preservation of a note of the 
Mongols ; but some of the Ming survive, and are highly 
valued as curiosities, in China. The late Sir G. T. Staunton 
appears to have possessed one; Dr. Lockhart formerly had 
two, of which he gave one to Sir Harry Parkes, and retains 
the other. The paper is so dark as. to explain Marco's de- 
scription of it as black. By Dr. Lockhart's kindness I am 
enabled to give a reduced representation of this note, as near 
a fac-simile as we have been able to render it, but with some 
restriction, e. g., of the seals, of which in the original there 
is the faintest indication remaining." * 

* Although in monetary science we are not a whit in advance of 
the Mongols of the thirteenth century, we need not wholly lose our 
self-respect, but may even take some comfort in the fact that we 
certainly far surpass them in the science of locomotion. When 
Marco Polo was at the court of the Great Khan, in 1291, there came 
an embassy from Arghun Khan of Persia, representing that his 
master's favorite Mongolian wife, having recently died, had desired 
to be succeeded by a lady of her own tribe from her native land of 
Cathay. An intelligent and lovely maiden of seventeen years, 





The second government paper-money issued, but 
far eclipsed by that of the Mongols, on a grand 
scale, was that of the Revolutionary currency of 
the United States. The government at the time 
was provisional, having no other purpose than the 
assertion of the rights of the colonies, and might 
cease with the adjustment of the controversy with 
the parent country. It consisted of a collection of 
delegates from the several colonies, and lacked, in 
theory at least, the power of taxation. In the 

rejoicing in the name of Cocachin, was selected by the great Kublai 
as the future spouse of his nephew, and handed over to the em- 
bassy to be conveyed to her new home. Marco Polo, who had 
long been anxious to " carry his gear and his gray beard to his 
native lagoons," solicited permission to join the embassy. Indeed 
the lady was confided to his especial care from his known probity 
and great experience as a traveler. Something over two years 
elapsed before the embassy, with its fair charge, reached Tabriz. 
Upon its arrival, great was the consternation of all to find that 
Arghun had been long dead, Kaikatu, his brother, reigning in his 
stead the embassy having consumed nearly as much time in go- 
ing to, as in returning from, the land of Cathay. A catastrophe was 
happily averted. The princess, as sensible as she was fair, finding 
Ghazan Khan, son of Kaikhatu, and heir apparent, to be a man of 
good qualities and pleasing address, readily transferred her affec- 
tions from the dead to the living ; and the toils and dangers of the 
long journey were quickly forgotten in the marriage festivities 
which followed. 


emergency, an issue of notes naturally suggested 
itself, although the disasters resulting from similar 
issues in nearly every colony must have been fresh 
in the minds of all. The argument of necessity 
prevailed, and on the 22d of June, 1775, an issue of 
$3,000,000 was made. Such was the beginning of 
the Continental money, as humble and insignifi- 
cant in the outset as the Genie of the Arabian 
tales, whom a small bottle at first sufficed to 
hold, but who, freed from his imprisonment, swelled 
into proportions so vast as to infold both sea and 
land. But the Genie could contract as well as 
expand. In a freak of vanity, to show his power, 
he crept back again into the bottle, which the fish- 
erman, who had unwittingly set him free, instant- 
ly closed, and so escaped with his life. Here the 
parallel ends ; for the genie of the printing-press, 
from an equally insignificant beginning swelled into 
proportions still vaster than those of his prototype, 
which no power, not even his own, could reduce, 
and could be got rid of only by his death, but not 
till a whole nation was very nearly brought to the 
same desperate pass. 

The following is a copy of the notes first issued : 


" No. dollars. 

" This bill entitles the bearer to receive [from one to twen- 
ty] Spanish milled dollars, or the value thereof in gold or 
silver, according to the resolution of the Congress, held at 
Philadelphia, on the loth day of May, A.D. 1775." 


The notes, which were made legal tenders by the 
government, as well as by the Federal States, were 
distributed among the latter in ratio to their popu- 
lation, or to the quotas they were to furnish for the 
war. Each, it was assumed, would undertake to 
retire the amounts awarded it. The first issue be- 
ing soon exhausted, a like amount was ordered on 
the 26th of November, 1775, and an additional 
one of $4,000,000 on 'the I7th of February, 1776. 
Before the close of 1775, however, and when only 
about $3,000,000 were actually in circulation, the 
notes began to decline in value. The first hesita- 
tion to receive them was on the part of the Qua- 
kers, on account, it was alleged, of their hostility 
to war. The government, or Congress, lost no 
time in looking into the matter, and on the i^th 
of January, 1776, passed an order that, whoever 
should refuse to receive its notes, " should be 
deemed, published, and treated as an enemy of 
his country." Newspapers and pamphleteers im- 
mediately took up the subject and proved, to their 
satisfaction, the notes to be " as good as gold." 
The groundwork of their argument was that what- 
ever was agreed upon as money, was money, and 
equal in value to silver and gold. 

The necessities of government continuing, a fur- 
ther issue of $5,000,000 was authorized on the 6th 
of May, 1776. A serious decline in the value of 
the notes followed. Pursuant to directions issued 
to him, General Putnam, then commanding in Phil- 


adelphia, issued an order that in case of any one 
refusing to take the money for goods offered to be 
purchased, such goods should be forfeited and the 
offender thrown into prison. The necessary effect 
of such order was to accelerate the decline, so that, 
in December, 1776, one dollar of silver would com- 
mand two of paper. Congress, as was natural, was 
greatly alarmed, and on the 4th of January, 1777, 
passed a resolution that " its* notes were equal in 
value to, and ought to pass at the rate of, gold; and 
that any person refusing to receive them at such 
rate should be deemed an enemy .of his country, and 
should forfeit the value of the money, or of the 
house, lands, or commodity offered to be pur- 
chased." The resolution of course produced no 
other effect than to hasten the decline. 

As the people, in numerous instances, refused to 
take them, Washington was authorized to seize 
whatever he deemed necessary for the support of 
the army; and if the owner would not accept the 
notes in payment at a fair rate, he was liable to be 
thrown into prison. .Such penalty was speedily re- 
inforced, by the passage by Congress of a resolu- 
tion declaring that any person who should refuse 
to receive government notes offered in payment for 
goods should forfeit the goods, and in addition pay 
a fine of five dollars where the goods purchased 
were of less value than that sum ; and a penalty 
equal to their value when that exceeded five 
dollars. For a seco'nd offense, the offender was 



liable to banishment from the State to any place 
which the committees of safety of the States 
where the offense was committed might desig- 

Government, having no other resource, continued 
the issue of notes, regardless of their decline. To 
sustain their price, the States were recommended to 
establish tariffs of prices. The New England States 
met for such purpose, by delegates, in Providence, 
on the 25th of January, 1777, and established a rate 
by which a bushel of wheat was to be sold at Js. 6d. 
in notes ; one of rye, at $s. ; a gallon of rum at 
6s. &/. ; a pound of raw cotton at 33^. ; and so 
on through the whole list of articles entering into 
consumption. Other States followed their example. 
Government, in the mean time, continued the issue 
of notes, which for the year 1877 equaled $13,000,- 
ooo. Their vahae at that time was in ratio of 4 
to i of specie. To meet the decline, it was at- 
tempted to reduce their amount by making requi- 
sitions upon the States for $5,000,000. Nothing 
came of these ; on the other hand, the amount of 
notes was increased by repeated issues, so that by 
the end of April, 1878, their total amount equaled 
$51,000,000. In May of that year came the news 
of the French alliance, in consequence of which 
the notps rose somewhat in value. Congress was 
greatly elated, and issued a spirited address to the 
people, in which the vast resources of the country, 
and the consequent value of its notes, were fully 


set forth. These again soon and largely declined, 
and correspondingly increased issues had to be 
made, government having no other resource. By 
the close of 1778 the whole amount outstanding 
reached $101,500,0x30. The attention of reflecting 
minds was now turned to the situation ; and the 
repeal of the laws seeking to make the value of 
the notes equal to that of gold was already urged. 
They had so fallen in value that such provision was 
regarded as too absurd to longer have a place upon 
the statute-book. This suggestion was speedily 
adopted, and by it the first decisive blow was given 
to the credit of the notes. It was an acknowledg- 
ment of a difference between them and gold ; and 
if so, in what did this difference consist? The 
whole question of their value, which had always 
been avoided, was now up for discussion. Their 
holders at once saw the abyss over which they 
stood. It was charged that the Act of Congress 
meant repudiation. This was indignantly denied ; 
Congress as usual protested its good faith that 
every dollar of its notes should be faithfully paid. 
The time, however, in which such protestations 
could have effect had passed. The notes continued 
to decline much more rapidly than ever. That 
they did not at once go out of circulation was due 
to the fact that every issue served to pay old debts 
at a reduced cost to the debtor. Swindling was at 
once reduced to a system, Congress all the time 
abetting it by constant issues, always put upon the 


market, each at a less rate than the preceding 

At the close of 1778 the value of the notes had 
sunk in the ratio of 8 to I of coin. Great distress 
and despondency were the result. The most po- 
tent enemy with which the government had now 
to deal was its own money. It had no other re- 
source, and this was fast failing it. As a neces- 
sary expedient, it invested Washington with dic- 
tatorial powers. But he was almost without any 
other resource than that supplied by his own great 

* It is well known that Washington, after a certain period, refused 
to receive the government notes, in payment of debts contracted 
previous to its issue. The following extract, from Sparks's "Life 
of Washington," will show what he thought of payments made in 
government notes (p. 443) : 

"When the army was at Morristown, a man of respectable stand- 
ing lived in the neighborhood, who was assiduous in his civilities 
to Washington, which were kindly received and reciprocated. Un- 
luckily, this man paid his debts in the depreciated currency. Some 
time afterward, he called at headquarters, and was introduced as 
usual to the General's apartment, where he was then conversing 
with some of ftis officers. He bestowed very little attention upon 
the visitor. The same thing occurred a second time, when he was 
more reserved than before. This was so different from his cus- 
tomary manner, that Lafayette, who was present on both occasions, 
could not help remarking it ; and he said, after the man was gone, 
' General, this man seems to be much devoted to you, and yet you 
have scarcely noticed him.' Washington replied, smiling, ' I know 
I have not been cordial : I tried hard to be civil, and attempted 
to speak to him two or three times ; but that Continental money 
stopped my mouth.' " Life and Writings of Washington, vol. I., 
P- 133. 


character. For want of pay a mutiny broke out in 
the army stationed at Morristown, threatening the 
gravest consequences. This was only averted by 
the influence and address of the Commander-in- 
chief. While the army was, for want of means, 
unable to achieve anything worthy of itself, and 
was filled with discontent bordering upon insubor- 
dination, the operations of commerce and trade 
were completely paralyzed. Never was there a 
more wretched picture than that presented by the 
United States, during the reign of paper money, 
for the four years beginning with 1776 and ending 
with 1779. 

The financial position becoming daily more and 
more critical, government attempted to raise the 
value of the notes by reducing their amount by 
requisitions upon the States. This expedient en- 
tirely failed. New notes had to be issued in large 
amounts, and matters went continually from bad to 
worse. A corresponding rise in prices took place, 
charged to forestallers and monopolizers, and to 
combinations of the rich to oppress the poor. Flour 
had now risen to nearly a dollar a pound ; salt to 
forty dollars a bushel, and all other articles of con- 
sumption in equal ratio. In the leading towns 
meetings were held to denounce, in the words of 
the one held in Boston, " monopolists and extor- 
tioners, who, like canker-worms, are gnawing upon 
your vitals ; who are reducing the currency to 
waste paper by refusing to take it f$r many arti- 



cles. We have borne with such wretches, but we 
will bear with them no longer. Boston shall no 
longer be your place of security. Ye inhabitants 
of Nantucket, who first introduced the accursed 
crime of refusing paper money, quit the place, or 
destruction shall attend your property, and your 
persons shall be the objects of vengeance ! " 

Congress still went on as in the past, issuing its 
notes, and issuing addresses to show their unques- 
tioned value. " Let us suppose," it said, in an ap- 
peal to the people, " that the whole debt at the 
close of the war will equal $3(X),ooo,ooo, of which 
$200,000,000 will be notes, and $100,000,000 inter- 
est-bearing debt ; such a sum will average only $100 
per head. What is such a paltry sum to a people 
occupying and owning a vast continent, and whose 
numbers double every twenty years ? How light, 
within such time, will be the burden of such a 
debt ! The share of the poor people will not equal 
$10 a head." * All such appeals had now no other 
effect than to increase the general alarm. The 
amount of notes issued in 1779 equaled $140,000,- 
ooo. The amount realized on this vast sum did 
not probably exceed $5,000,000 in coin. The total 
amount of the notes had now reached $241,000,000. 
At the end of the year, when their issue ceased, 

* The expenditures of the United States for 1777 amounted to 
$62,250,000 payable in notes, $78,660 in specie and $28,525 in 


their value had fallen to 40 for I. As a further 
issue .of notes similar in kind was not to be thought 
of, Congress attempted to get in the old, in order to 
open the way to an issue of new notes having a 
higher value. It made requisitions upon the States, 
payable in notes, to the amount of $15,000,000 
monthly. At the same time it provided that the 
requisitions might be paid in coin at the rate of 
one to forty of the notes. As fast as the old notes 
came in, new notes were to be issued, at the rate 
of one to twenty of the old, payable on demand 
in specie, and bearing interest at the rate of five 
per cent. It was hoped that the provision of inter- 
est would maintain them in circulation. The pub- 
lic, however, had been so often deceived, that no 
assurance of the kind coming from Congress had 
any effect whatever. The days of Continental 
money were numbered. Congress did not attempt 
to enforce the circulation of the new notes. The 
old continued to be in circulation, and to be active- 
ly dealt in, till they fell to the rate of 500 to I. 
To that rate of depreciation there were always 
enough ready to take them in the expectation that 
some provision might ultimately be made therefor. 

When the notes went wholly out of circulation, 
they were still legal tender at their nominal value 
in the payment of debts. Such provision, however, 
was regarded as too monstrous to be availed of by 
the most unprincipled and desperate. One might, 


with the same reason, have offered a pebble, picked 
up on the streets. Early in 1781 Congress took up 
the matter, and recommended a total repeal of the 
legal-tender quality of the notes. The States which 
had made the notes their own followed with simi- 
lar recommendations. They had then ceased to 
have any market value. So long as it was supposed 
that they possessed any value resulting from the 
probability of their payment, the legal-tender pro- 
vision re-enforced such value. When the public be- 
came satisfied that the notes never would be paid, 
the clause ceased to have any force or effect what- 

Upon the fall of the government currency, the 
country was not wholly destitute of a circulating 
medium. In anticipation of such fall, specie had 
already begun to make its appearance. Before the 
close of 1780, large amounts were in circulation. 
Where it came from no one could tell. " Gold and 
silver," said Paine, in his " Crisis," "that for a while 
seemed to have retreated again into the bowels of 
the earth, have once more arisen again into circula- 
tion, and every day adds new strength to trade, 
commerce, and agriculture." The disturbing cause 
removed, society at once resumed its normal condi- 
tion of health and prosperity. There was no longer 
any complaint of the want of a circulating medium, 
though this, at the time, consisted wholly of foreign 


Its effect in sweeping away the accumulations 
of the past was by no means the greatest evil result- 
ing from a currency of government notes. 

" That the helpless part of the community," said Ramsay, 
the historian of, and prominent actor in, the War of the Rev- 
olution, " were legislatively deprived of their property was 
among the lesser evils which resulted from the legal tender of' 
depreciated bills of credit; the iniquity of the laws estranged 
the minds of many of the citizens from the habits and love of 
justice. The nature of obligations was so far changed that 
he was reckoned the honest man who, from principle, delay- 
ed to pay his debts. The mounds which government had 
erected to secure the observance of honesty in the commer- 
cial intercourse of man with man were broken down. Truth, 
honor and justice were swept away by the overflowing 
deluge of legal iniquity." * 

The following is from a contemporary writer, 
Pelatiah Webster, a most competent witness and 
observer of the times: 

" It" (government money) "has polluted the equity of our 
laws ; turned them into engines of oppression and wrong; 
corrupted the justice of our public administrations; destroyed 
the futures of thousands who had the most confidence in 
it ; enervated the trade, husbandry and manufactures of the 
country ; and went far to destroy the morality of our people. 
* * * We have suffered more from this cause than from 
any other cause or calamity.' IP has killed more men; per- 
verted and corrupted the choicest interests of our country 
mdre, and done more injustice than even the arms and artifice 
of the enemy." 

*" History of the Revolution," vol. ii., page 134. 


After the fall of the Continental money, no- 
^thing more was heard of it till Mr. Hamilton en- 
tered upon his work of adjusting the debts of the 
old government to be acknowledged by the new. 
While the interest-bearing debt of the old was as- 
sumed, with interest at its full amount, the notes, 
which equaled more than three times that of such 
debt, were " cut off with a shilling." They were 
allowed to be funded at the rate of 100 for i. This 
provision was made in their favor only to show that 
they were not quite forgotten. Not a voice was 
heard in favor of any more generous provision. No 
attempt was made to raise them from the sepulchre 
in which they had been so long entombed. They 
were chiefly (as will always be the case when the 
calamity comes) held by the poor, especially by 
the rank and file of the army, who carried them 
home only as mementos of the years of toil, hard- 
ship, and danger. By way of adding a grotesque- 
ness to the strange picture, many of them paid away 
a year's earnings for a single breakfast, or for a 
bottle of wine to drink a farewell parting with old 
comrades in arms. 


The third great example of government paper 
money is that afforded by France. When the Rev- 
olution of 1789 broke out, the nation was not only 
greatly exhausted from past excesses, but appeared, 


in the confusion which prevailed, incapable of pro- 
viding the means of defense, threatened as she wag 
with attacks from all the great powers of Europe. 
One of the resources naturally suggesting itself was 
an issue of government money. This suggestion 
was re-enforced by the fact that the estates of the 
Church, valued at 4,000,000,000 francs, yielding an 
income of 200,000,000 francs, had been confiscated 
to the State, and would serve, it was assumed, as 
an adequate basis for such currency, the holders of 
which were to have the right to exchange it for 
lands at a fixed valuation. The assignment of the 
lands as security for the notes gave them the name 
by which they have always been distinguished 

The proposition, of course, met with vigorous 
opposition from prudent and sensible men, at the 
head of whom stood the celebrated Necker. The 
disastrous effects of the paper money of John Law,* 
which so convulsed the kingdom, and finally re- 
duced it to a condition of bankruptcy and ruin, 
were still remembered by the aged. Its results 
were familiar to all. An example so striking would 
seem to be conclusive. The argument drawn from 
it was easily evaded. " Paper money under a des- 
potism," said one of the advocates of the new money 

* An account of Law's paper money is not given, for want of 
space. The whole amount issued equaled about 3,000,000,000 
francs. As is well known, it was, after it had wrought unspeakable 
mischief, wholly repudiated. 


in the National Assembly, " is indeed dangerous : 
it favors corruption ; but in a nation constitutionally 
governed, and which itself takes care of the emis- 
sion of its notes, which determines their number 
and use, that danger no longer exists." Another 
member declared that the Assignats would render 
gold and silyer more abundant, by drawing them 
out of the coffers where they were then hoarded. 
In vain were the necessary consequences of such a 
currency painted in all their length and breadth ; 
in vain were the effects of Law's currency portrayed 
in the most emphatic language. The friends of 
the proposed measure easily carried the day, and 
in April, 1790, an issue of 400,000,000 francs was 
authorized. They were to be secured by a pledge 
of productive real estate, and to bear a rate of 
interest equaling three per cent. Never did a 
currency of the kind seem to rest upon a stronger 
basis, while the provision of interest, it was hoped, 
would prevent their conversion and maintain them 
in circulation. The result was hailed as a vast tri- 
umph by the party of Revolution by the party of 
progress. The Assembly, in an address issued to 
the French people, declared that the nation, " by 
this grand means had been delivered from all un- 
certainty, and from all the ruinous results of the 
credit system incessantly a prey to the caprices of 
cupidity ; that the issue would bring back into the 
public treasury, and into all branches of industry, 
strength, abundance, and prosperity." * * * " Paper 


money," continued the report, " is without inherent 
value, unless it represents some special property. 
Without representing some special property, it is 
inadmissible in trade to compete with a metallic 
currency, which has a value real and independent 
of the public action ; therefore it is that the paper 
money, which has only the public authority as its 
basis, has always caused ruin where it has been 
established ; that is the reason why the bank notes 
of 1720, issued by John Law, after having caused 
terrible evils, have only left frightful memories. 
Therefore it is that the National Assembly has not 
wished to expose you to this danger, but has given 
this new paper money, not only a value derived 
from the national authority, but a value real, im- 
mutable ; a value which permits it to sustain ad- 
vantageously a competition with the precious met- 
als themselves. * * * These Assignats, bearing 
interest as they do, will soon be considered better 
than the coin now hoarded, and will again bring it 
out into circulation." 

The first effects of the issue seemed to justify 
all the considerations urged in its favor, and to 
confound all who opposed it. The public treasury 
was relieved. An amount of gold and silver coin 
equal to that of the notes was discharged from 
use as money, and became merchandise for export. 
The wealth of the nation seemed to be increased 
in like ratio. By the end of August, however, no 


little dismay was produced by the fact that the 
first issue had been wholly exhausted, leaving the 
government as destitute as ever. The old remedy 
again suggested itself with still greater force it 
was so facile, and at the same time, so effectual. 
Its opponents, seeing the tendency and the inev- 
itable results that were to follow unless it could be 
checked, made a far bolder stand than against the 
first issue. It was for a time by no means certain 
to which side the Assembly would incline. A com- 
mittee to whom the subject was referred did not, in 
terms, recommend a further issue, but declared 
that the first issue had been successful ; that the 
notes were the most economical means to be re- 
sorted to ; and that the country was in great peril, 
and " was still to be saved " ! 

The bill for the second issue being introduced, 
Mirabeau, the great figure, not only in the Assem- 
bly, but in France, threw all the force of his in- 
fluence and character in favor of this measure, 
although in a letter written early in 1789 he had 
spoken of paper money as " a nursery of tyranny, 
corruption, and delusion ; a veritable debauch of 
authority in delirium." He may still have enter- 
tained the same sentiments, at the same time 
yielding to what he deemed a state necessity. 
The first issue, he declared, had worked well ; it was 
a kind of money entirely different from that of 
Law ; no harm could result from its issue ; the 
French had now become so enlightened that " de- 


ceptive subtleties can no longer deceive patriots 
and men of sense in this matter. We must go 
on," he continued, " to accomplish what we have 
begun. The paper is guaranteed by the national 
lands, and by the good faith of the French nation. 
So soon as it becomes too abundant it will be ab- 
sorbed in rapid purchases of the lands." He pre- 
dicted that the members of the Assembly would 
be surprised at the astonishing success of the 
money, and that there never would be a super- 
abundance of it. Another speaker, Gouy, pro- 
posed to liquidate the whole national debt " by an 
issue of 2,400,000,000 of money by one single 
operation grand, simple, and magnificent ! " He 
advocated a plebiscite an appeal to the people 
"who," he said, " ought alone to give law in a mat- 
ter so interesting." 

To all such arguments, or rhapsodies rather, the 
opponents could only reply by predicting by 
demonstrating the inevitable result a decline in 
the value of the notes, their constant increase as 
new necessities arose, and their final collapse, which 
was to involve all interests and all classes in a com- 
mon ruin, and of which Law's money afforded such 
a striking example. In vain did Necker oppose 
his great presence, his great wisdom, his great 
experience and his great character, only to be 
defeated, and in the end to be driven from his 
country. Talleyrand, who, next to Necker, exerted 


the most powerful influence against the measure, 
stated the whole question in a single sentence: 
"You can, indeed, arrange .it so that the people 
shall be forced to take a thousand francs in paper 
for a thousand francs in specie ; but you can never 
arrange it so that a man shall be obliged to give a 
thousand francs in specie for a thousand francs in 
paper. In that fact is imbedded the entire ques-' 
tion ; and on account of that fact the whole system 

The question of the new money engrossed not 
only the Assembly, but the nation. The mercan- 
tile classes almost unanimously opposed the issue. 
Of the memorials that came from thirty-two lead- 
ing towns, twenty-five opposed, and only seven 
favored the issue of the notes. The Assembly 
itself was nearly equally divided. The uncer- 
tainty and importance of the issue stimulated 
Mirabeau to the highest pitch of eloquence. In 
his final speech he asserted the value of the notes, 
declared that each would represent a specific 
appropriation of land. " I would rather," he ex- 
claimed, " have a mortgage of a garden than of a 
kingdom. If gold," he continued, " has been 
hoarded through timidity or malignity, the issue of 
paper will show that gold is not necessary, and if 
will come forth." In vain was it replied that pre- 
cisely the same arguments were used and paved 
the way to the issue of John Law's money; that 


that was to be limited in amount, and always to be 
completely secured ; that the apparent advantages 
of the first issue were, in the same way, urged as 
the reason for the second; and -that, upon such 
reasons, issue followed issue, till France was in- 
volved in bankruptcy and ruin. In vain was one of 
Law's notes, saved from the wreck of time, held up 
before the Assembly as a memento of the past, and 
as a warning for the future. It was replied that 
" Law's money was based upon the phantoms of 
the Mississippi, while ours rests upon the solid 
basis of ecclesiastical lands." The newspapers of 
the day powerfully re-enforced the prevailing senti- 
ment by declaring land to be a far superior basis 
for an issue of paper than gold. Such sophistries 
as these, supported by the efforts of government, 
through its officials, prevailed, and the measure 
passed by a small majority the ayes being 508, 
and the nays 423. It authorized the issue of 
800,000,000 of notes ; but provided, in the most 
emphatic terms, that in no case should the whole 
amount put into circulation exceed that and the pre- 
vious issue, i. e., 1,200,000,000 of francs. It also 
provided, in order to maintain a healthy contrac- 
tion, that all the notes received for lands should be 
immediately burned. . 

So much for the humble beginnings of the deluge 
which was to sweep, with resistless force, over the 
land, carrying, at last, everything in its train. In 


such measures one argument stands for all an 
apparent' necessity which those in power have not 
the courage to face. The most solemn assertions 
that the issue shall never exceed a certain amount ; 
shall be so moderate that the notes can never work 
harm ; that their payment is secured beyond con- 
tingency are the seductive influences which lead to 
the first fatal step. This taken, all beyond follows 
as an inevitable necessity. While the tide is swell- 
ing, nothing but congratulations are heard on every 
hand. Of such examples we copy the following 
from a pamphlet signed " A Friend of the Revolu- 
tion," published in Paris just after the passage of 
the bill authorizing the second issue : 

" Citizens, the deed is done. The assignats are the key- 
stone of the arch. It has just been happily put in position. 
Now I can announce to you that the Revolution is finished, 
and there only remain one or two important questions. All 
the rest is but a matter of detail which cannot deprive us any 
longer of the pleasure of admiring, in its entirety, the impor- 
tant work. The provinces and the commercial cities which 
were at first alarmed at the proposal to issue so much paper 
money, now send expressions of their thanks ; specie is com- 
ing out to be joined with paper money. Foreigners come to 
us from all parts of Europe to seek their happiness under 
laws which they admire ; and soon France, enriched by her 
new property, and by the national industry which is prepar- 
ing for fruitfulness, will demand still another creation of 
paper money." 

The nation, now fairly committed to the new 
money, neglected all other methods for providing 


for expenses rendered necessary by dangers which 
threatened on every hand. The second issue was 
not only soon exhausted, but prices rose in ratio 
to its amount, leaving the great mass more necessi- 
tous than ever, and more clamorous than ever for 
more money. As the effect of such money was to 
exhaust, in a like" degree, instead of adding to, the 
wealth of the nation, there seemed to be no re- 
source left but a continued issue of it. For a mo- 
ment some relief was gained by reissuing, instead 
of burning, as required by law, the notes received 
for lands. The first 150,000,000 so received were 
immediately paid out ; but these were a drop in the 
bucket compared with the amount now required. 
The cry of a "lack of circulating medium" grew 
fiercer and fiercer, and was met, from the sheer 
necessity of the case, by an issue, on the i/th of 
June, 1791, of 600,000,000 of new notes, in spite of 
the solemn legal provision that not a franc over 
1,200,000,000 should be issued. This issue met 
with little opposition, those who opposed the first 
and second being thoroughly disheartened, in exile, 
or dead. There was now but one voice that of 
universal approbation and acclaim. By this time 
the Jacobin clubs, which were fast becoming the 
real power in France, added their potent voice to 
the general demand. From such there was no ap- 
peal. The effect upon the public, so far, had been 
that of a highly stimulating potion to a powerful 
frame. France was in an ecstasy of activity and 



joy. A few clouds, however, soon appeared in the 
horizon. The price of the notes steadily fell. The 
decline was attributed to various causes ; one to 
a want of knowledge, on the part of the people, of 
their real worth. To meet the decline, an address 
was voted by the Assembly, setting forth the good- 
ness of the currency, and the absurdity of pre- 
ferring coin. Another cloud was the almost entire 
disappearance of specie. Various were the theories 
offered in explanation. The leading newspaper at 
the time undoubtedly expressed the public senti- 
ment when it declared that " coin will keep rising 
until the people have hung a broker." English 
emissaries, it was alleged, were instilling notions 
hostile to paper, and more than one innocent per- 
son fell a victim to the popular wrath, under the 
assumption of being engaged in raising gold and 
depressing paper. It was a crime to be found in 
the possession, of coin ; death was suggested as a 
proper penalty for those hoarding it. 

It was not long before the delirium began to tell 
upon the nation. The price of the money steadily 
declined, and that of all kinds of merchandise as 
steadily rose. The markets were glutted with 
goods which no one could afford to buy. Immense 
importations were made from abroad which could 
be paid for only in coin. The effect of the first 
issues had been to create an extraordinary activity. 
Manufacturers were stimulated' to an enormous 
excess of production. When the tide turned, this 


class was the first to give way. No one could tell 
whether that which he produced would bring fifty 
or a hundred francs ; or whether it would have any 
market value whatever. With the breaking down 
of the manufacturers, immense numbers of work- 
men were thrown out of employment. These soon 
became an organized mob, waging relentless war 
against all order and property. All the operations 
of society were reduced to mere games of hazard. 
" Commerce," to use the language of one of the 
leading economists of France, " was dead. Betting 
took its place." " What shall I say?" said an- 
other writer, " of the stock-jobbing, as frightful as 
it is scandalous, which goes on in Paris under the 
very eyes of our legislators ; a most terrible evil, 
and yet, under the present circumstances, a neces- 
sary evil ? " The great mass of the gamblers were 
speedily reduced to poverty, and became the 
leaders of the populace, now reduced to the last 
extremity of want and despair. The spirit of spec- 
ulation spread from Paris into all the departments, 
and everywhere produced like results. " What 
a prospect," said von Sybel, the great historian 
of that period, " for a country, when its rural pop- 
ulation was changed into a great band of gamblers ! " 
As the value of the currency was always fluctuating, 
each party to an exchange was always on the alert 
to save himself from loss by attempting to over- 
reach the other. In this way almost every act 
became an incentive to, or was tainted with, fraud. 


Public and private morality were alike overthrown : 
Mirabeau himself was only a stipendiary of the 
Court. Numerous others, only a little less distin- 
guished, were in the market, to be bribed equally 
by the Court or those who basked in its favors. 
Society itself seemed hardly capable of continued 
existence. All public spirit was at an end. All in 
debt now wished to see the decline in the value of 
the government money, as their burdens would be 
reduced in like ratio. During the periods of infla- 
tion everybody ran into debt, hoping to make mon- 
ey by the rise in what was purchased. Immense 
amounts of the forfeited Church lands were pur- 
chased, small payments only having been made at the 
time. The purchasers were in danger of losing all 
they paid. It became, in fact, the interest of almost 
all persons of influence to depreciate and discredit 
the government in every way possible. Every one 
who sought .to sustain it, protect its rights, or to 
maintain order, was an enemy of the people. Great 
numbers speedily paid the highest penalty for such 
crimes. Speculators, members of the Jacobin clubs 
and leaders of the mob became prominent members 
of the Assembly, and soon secured almost absolute 
control of that body. In the meantime the cry for 
more money arose louder and louder. In Decem- 
ber, 1791, 300,000,000 more of francs were author- 
ized, making the total issue 2,100,000,000. As 
might be expected, such a state of things gave rise 
to the most absurd theories, one of which has 


lately been reproduced by a notorious character 
in the United States : that the currency of a coun- 
try should be of a kind that would have no circula- 
tion out of it. In this way, all its commerce and 
trade would be wholly independent of that of 
other nations. It was openly proclaimed that the 
laws of political economy, however applicable to 
other times and to other nations, and however 
" sufted to the minions of despotism, were not ap- 
plicable to the enfranchised inhabitants of France 
at the close of the i8th century." In proof, on the 
3<Dth of April, 1792, came the fifth issue, amounting 
to 300,003,000. Other issues continued to follow 
in rapid succession, till the whole amount put out 
to the I4th of December, 1792, equaled 3,400,000,- 
ooo, of which 2,800,000,000 remained in circulation. 
Early in 1793 came a new source of wealth to the 
nation the confiscated estates, having an estimated 
value of 3,000,000,000, of the nobles and landed 
proprietors who had fled the country. As a neces- 
sary consequence, new issues of paper money based 
upon such lands were made ; prices rose enormous- 
ly, both from the abundance of the money and the 
unwillingness of holders of merchandise to receive 
it. The people, who had no longer any means of 
purchase, and who were on the verge of starvation, 
took the law into their own hands. Great mobs 
broke open and plundered the shops and ware- 
houses with impunity. So little power remained to 
the government that it was glad to buy them off 



by the payment of 7,000,000 of francs ; a leader of 
the mob declaring that the plundered " merchants 
were giving back to the people what had hitherto 
been robbed of them." The necessities of the 
people speedily showed themselves in legislation. 
Maximum laws were passed, making sales of goods 
compulsory, and fixing their price in paper. 

" This," as von Sybel declares, " was the most compre- 
hensive attack on the rights of property, as far as our histor- 
ical knowledge reaches, which was ever made in Western 
Europe an attack made in the heart of a great and civilized 
nation, and one which was not confined to the brains of a few 
idle dreamers, but practically carried out in all its terrible 
consequences. It was made with fiery fanaticism and un- 
bridled passion, and yet with systematic calculation. Its 
originators victorious at home and abroad were perfectly 
free in their deliberations, and did not adopt their measures 
under the pressure of necessity or despair, but from deliberate 
choice. These are facts of universal significance, on which 
we ought to fix our attention all the more earnestly because 
they have been disregarded, although they are fraught with 
the most important consequences." . 

The result of these maximum laws was, that 
none who could help it would sell. The necessities 
of life could no longer be obtained ; the people in 
the large cities had to be put upon allowance. 
Tickets were issued entitling the bearer to a 
limited amount of a few articles necessary to ex- 
istence. The period of the real distribution of 
property had come, paper money having served as 
the instrument for confiscating the property of the 


kingdom by the extravagance, idleness and vice 
it produced, and by rendering impossible any well- 
directed, successful industry. 

The chaos and ruin which prevailed on every 
hand could not stifle family affection. Parents 
sought to make provision for their children, in 
something more valuable and permanent than gov- 
ernment notes. To defeat impulses so natural a 
law was passed which forbade the purchase or ex- 
change of specie at a rate higher than its nominal 
value in paper, the penalty for the offense being 
six months' imprisonment in irons. In the mean- 
time the cry for more money grew fiercer than ever. 
To meet it an issue was made, in May, 1793, equal- 
ing 1,200,000,000 francs. Immediately following 
this issue a law was passed imposing a forced loan 
upon the rich of 1,000,000,000 francs. As the notes 
rapidly sank in value under issues which now equaled 
4,600,000,000 francs (a small portion of which only 
had been taken in), Cambon, a leading member of 
the Assembly, devised a funding scheme, almost 
precisely similar to that which has been so often 
proposed in the United States that of intercon- 
vertibility. The holders of notes were to convert 
them into five per cent, government bonds ; to have 
the notes, if they required it, reissued to them. 
This scheme, as might have been expected, proved 
utterly futile. To check the fall of the notes 
1,000,000,000 were attempted to be called in by 



means of a forced loan. The first effect of such a 
reduction was, to sustain for a moment the value 
of the notes ; but the effect was soon lost. In the 
crisis the market-women of Paris made an earnest 
appeal to the Assembly " to pass laws to make 
paper as good as gold." In obedience to their re- 
quest, and a pressure from other quarters, Couthon, 
one of the most famous characters of the Revolu- 
tion, proposed and carried a law which provided 
that " any person who should sell an assignat at 
less than its nominal value should be punished by 
imprisonment in chains for twenty years." This 
was followed by a law making investments by 
Frenchmen in foreign countries punishable with 
death. As the proper crown of all these measures, 
a law was passed, on the I5th of August, 1793, vir- 
tually repudiating the interest-bearing debt of the 
nation by making it payable in the government 

In vain were all these efforts to defeat the opera- 
tion of laws as inexorable as those which regulate 
the procession of the seasons. The nation was al- 
ready in the throes of death from the most corro- 
sive of poisons a currency wholly divested of its 
proper constituent, capital. The very arm which 
mOst daily be stretched forth to sustain life was 
palsied. When a person in France, to-day, offers a 
bank-note in the purchase of a bale of cotton goods, 
he offers in payment that which perhaps represents 


a hogshead of sugar or a case of silk. The whole 
operation really consists in a mutual exchange of 
articles for consumption. Some one of these stands 
behind every note, and can always be reached by 
direct exchange. If it cannot be so reached, then 
the issuer stands ready to take in the note by pay- 
ing gold. In 1793, when a person offered a govern- 
ment note in exchange for a bale of cotton goods, 
he offered that which represented no corresponding 
equivalent. No consumable article stood behind it. 
The consequence was that the transactions which 
took place had no relation to things in actual exist- 
ence. Every one was conscious of this, and sought 
to escape the effect by overreaching his fellow. All 
the springs of society were tainted at the very 
source. No healthy process of any kind could de- 
velop itself in order to produce sound and useful 
results ; and as none had the courage to attack the 
cause, all were driven to invent excuses or apolo- 
gies for the result, as absurd and monstrous as the 
evil itself. The currency destroyed at the same 
moment alike the material, moral, and intellectual 
welfare of the nation. 

Up to the close of August, 1793, the whole 
amount of notes that had been issued had equaled 
4,616,000,000 francs, of which 3,776,000,000 were in 
circulation, a little over 800,000,000 having been 
taken in. At the close of June, 1794, the amount 
in circulation rose to 6,536,000,000 francs. As the 



notes continued to decline in value, issue necessa- 
rily followed issue in rapid succession, and in in- 
creased amounts to" make up for the decline, till the 
beginning of 1796, when the amount reached 45,- 
000,000,000, of which 36,000,000,000 ($7,200,000,- 
ooo) remained in circulation ! Their price had now 
fallen so low that it would no longer pay the cost 
of printing. A point was at last reached, at which 
all the penalties imposed excessive fines and for- 
feitures ; twenty years' imprisonment in chains ; and 
even the guillotine itself ceased to exert any in- 
fluence whatever. The history of the notes for the 
two years, from June, 1794, till their fall, is sum- 
marized in what has preceded, although their ef- 
fects, from the enormous amounts issued, far tran- 
scended in intensity those of any former period. 
As government had no other resource, and as it 
was felt that the life of the nation as a power in 
Europe was dependent upon the maintenance of 
its notes, it had to be present in almost every act 
of society. The contest was one between unbridled 
despotism, enacting laws wholly repugnant to rea- 
son and nature, with penalties cruel in the extreme, 
and enforced with remorseless celerity, on the one 
side ; and, on the other, a people supported by the 
strongest instincts and passions of the race a love 
of freedom and a determination to retain and ap- 
propriate in their own way that which they pos- 
sessed. It was a contest in which both parties 
were to meet with overwhelming defeat and dis- 


aster ; for the government could enforce the circu- 
lation of its notes only at their estimated value, while 
'the public could not avoid their use. 

Historians, in attempting to account for the ex- 
cesses and atrocities of the French Revolution, 
have strangely overlooked the influence of its cur- 
rency. When the vast amounts issued are consid- 
ered, its necessary effect, in overturning every use- 
ful industry, and in stimulating every species of ex- 
penditure and extravagance, was quite enough to 
produce all the terrible results that followed, with- 
out the influence of any of the causes that have 
usually been assigned. It was a contest which not 
only arrayed the people against the government, 
but turned the hand of every man against his 
neighbor. Society was a ship that was wrecked ; 
the crew and passengers perishing alike in the des- 
perate struggle to reach and appropriate some of 
the fragments that were floating in the wild waste 
of waters. In such a struggle a few only of the 
strongest were saved. The moneyed classes, fore- 
seeing the inevitable result, had methodically in- 
vested all the notes received by them in permanent 
forms of property, so that, when the final collapse 
came, the greater part of the capital of the nation 
was in their hands, the worthless notes being al- 
most wholly in those of the poor. 

" Before the end of the year 1795," says von Sybel, " the 
paper money was almost exclusively in the hands of the 
working classes, employes, and men of small means, whose 


property was not large enough to invest in stores of goods or 
national lands. The financiers and men of large means, 
though they suffered terribly, were shrewd enough to put 
much of their property into objects' of permanent value. The 
working classes had no such foresight, or skill, or means. On 
them finally came the great, crushing weight of the loss. 
After the first collapse came up the cries of the starving. 
Roads and bridges were neglected ; manufactures were gen- 
erally given up in utter helplessness. * * * None felt any 
confidence in the future in any respect ; none dared to make 
any investment for any length of time, and it was accounted a 
folly to curtail the pleasures of the moment to accumulate or 
save for an uncertain future." 

In 1795 a new revolution was inaugurated, which 
was in the end to produce results almost as strik- 
ing as those of that of 1789. The change of pol- 
icy, however, was not immediate ; a forced loan 
was again attempted, but the project failed, in conse- 
quence of which notes were again resorted to. Gov- 
ernment at last vigorously addressed itself to the 
great subject in hand. It decreed that no more 
Assignats should be issued, but in their stead Man- 
dats, " fully secured, and as good as gold." To ac- 
complish such a result, choice public real estate 
was set apart, fully equal in value, it was alleged, 
to that of the new notes, and which could be at 
once taken possession of by their holder at a value 
determined by the actual rental. In order to make 
the Mandats -< as good as gold," the Assignats in 
circulation were to be retired by a forced loan and 
other contrivances, so that each should be raised 


to one-thirtieth of the value of gold. That being 
accomplished, Mandats were to take the place of 
Assignats. The change was precisely that at- 
tempted in the Revolutionary currency of this 
country, and already described. It turned out, 
however, that the Mandats at once fell 30 per cent, 
below their nominal value. They continued to de- 
cline till their price in coin equaled only 5 per 
cent, of their nominal value. In spite of such re- 
sults, which were but the expression of natural 
laws, the hope and ingenuity of the people was by 
no means exhausted. The press and innumerable 
pamphleteers came manfully to the rescue. The vast 
superiority of Mandats to Assignats was asserted. 
The security for their payment was far better, and 
could be far more easily reached. No possible rea- 
son existed why they should fall in value as the As- 
signats had done. The refutation came, in the fall 
of the new notes, before the pamphlets had fairly 
issued from the press. To re-enforce their argu- 
ments it was provided by law, that any one who 
should orally, or in writing, depreciate the new 
notes, should for the first offense pay a fine of not 
less than 1,000 francs, and for the second should 
be imprisoned in irons four years. It was also pro- 
vided that any one refusing the Mandats, should 
for the first offense, pay an equal sum ; for the sec- 
ond, ten times as much ; and for the third, should 
be imprisoned two years. Every act of the kind, 
instead of sustaining the price, only served to pre- 


cipitate their fall. The great tragedy was now ap- 
proaching an end. On the i6th of July, 1796, a 
decree was passed, repealing all laws by which the 
circulation of the notes was sought to be enforced. 
Henceforth they were to be dealt in only at their 
real or estimated value. Of the Mandats, 2,500,- 
000,000 were put in circulation ; of the Assignats, 
36,000,000,000 remained in circulation. The repeal 
of the laws enforcing the circulation of the notes 
was but another word for the repudiation of the 
whole, as effectually as was the money of the Con- 
federate States repudiated upon the collapse of the 
Rebellion. The race, at the South, still existed ; 
but nearly all its accumulation, and its commercial 
and industrial institutions, were swept away. So 
with France. The great cause of the infinite ruin 
and demoralization which had been suffered being 
removed, society, destitute, but not wholly disheart- 
ened, set resolutely to work to repair the errors, 
follies, and waste of the past. No sooner had the 
system of paper money fallen than specie began 
to reappear, as it did upon the fall of the Rev- 
olutionary currency of the United States ; at first 
in small amounts, but gradually in sums sufficient 
to meet all the wants of commerce and trade. The 
lesson has never been forgotten, and will never be 
forgotten, in France. From the time of the fall of 
the paper money issued in her great revolution, 
that nation has displayed a prudence, wisdom, and 
capacity in her monetary affairs, that has rendered 


her a wonder among the nations. If she has com- 
mitted any error, it is in too great accumulations 
of specie, in order to render impossible the repeti- 
tion of her great disaster.* 


Such, as they appear in history, are the nature 
and effects of currencies of government notes, 
whether issued by the coarse despotisms of Asia, by 
the most refined and prudent nation of Europe, or, 
in its struggle for Independence, by the " Model 
Republic, the light and hope of the nations." We 
now have to add a second example of our own. In 
both instances, as well as in France, the same ne- 
cessity was pleaded and deplored " revolution " 
the terrible examples of the past being full in 
view. The Secretary of the Treasury at the time, 
Mr. Chase, could by no means recommend a mea- 
sure so fraught with danger and disaster. 

" The temptation," he said in his annual report for 1861, " es- 
pecially great in times of pressure and danger, to issue notes 
without adequate provision for redemption ; the ever-present 
liability of being called upon for redemption beyond means, 

* The writer wishes to acknowledge the great assistance, in the 
preparation of the article upon the French Legal-Tender Currency, 
derived from the very valuable paper, entitled " Paper-Money Infla- 
tion in France," by the Hon. A. D. White, President of Cornell 


however carefully provided and managed ; 4he hazard of 
panics precipitating demands for coin, concentrated on a few 
points and a single fund ; the risk of a depreciated, depreci- 
ating, and finally worthless paper money ; the immeasurable 
evils of a dishonored public faith and national bankruptcy- 
all these are the possible consequences of a system of govern- 
ment circulation. * * * In the judgment of the Secretary 
these possible disasters so far outweigh the probable benefits 
of the plan, that he feels himself constrained to forbear re- 
commending its adoption." 

Mr. Sherman, the present Secretary of the Trea- 
sury, equally deplored the cruel necessity upon the 
nation. The currency to be used, was, however, 
to be merely a temporary expedient, easihy man- 
aged and' soon to give way to a juster and more 
adequate system of raising money. 

" I know very well," he said in the speech already referred 
to, in support of the issue, " that if you continue this issue of 
demand notes by others, you will depreciate and break down 
the whole system. I do not believe the issue of $150,000,000 
will do any harm. But if you continue to issue other sums 
you will at once depreciate the credit of these demand notes 
and destroy their value. 

" After all, Mr. President, this is a MERE TEMPORARY EX- 
PEDIENT. // is manifest that we must rely upon some other 
source of obtaining money. We dare not repeat this experi- 
ment a second time. If we do, we enter upon the same course 
that was followed in the French Revolution, and also by our 
American ancestors. * * * Do you tell me that this will 
create an inflation of prices ? I do not think so. If you 
should follow this issue by another, you might create a dis- 
turbance in your financial operations ; but I think this will 


Mr. Sherman's argument, from which we have 
room only for the preceding extracts, summarized 
all that were made in favor of the measure. The 
necessity was overpowering ; the amount was to be 
very small, and never to exceed a certain limit ; the 
measure was a mere temporary expedient, which, 
considering the limited sum to be issued, could 
work no serious* harm ; the vast wealth of the 
country would enable it, on the collapse of the re- 
bellion, easily to retire the notes arguments a 
thousand times repeated on similar occasions, and 
always effectual with weak and irresolute natures in 
the face of a great emergency. In vain were op- 
posed considerations drawn alike from reason and 
the examples of the past ; an issue of $150,000,000 
of notes was voted, but only by a small majority in 
either House. The first fatal step taken, the next 
followed by irresistible necessity. Within a few 
months $150,000,000 more were called for. Issue 
followed issue, till the whole amount, including in- 
terest-beating legal-tender notes, reached nearly 
$800,000,000 ! 

We do not propose to enter at length upon the 
question of the expediency of the issue of the gov- 
ernment notes, although we believe it to be demon- 
strable that the resort to them was not only wholly 
unnecessary, but that they were throughout the 
most formidable obstacle encountered in the prose- 
cution of the war. The disastrous consequences of 


their issue we are still laboring in vain to over- 
come. The intense spirit of patriotism which was 
aroused, the alacrity with which the moneyed classes 
and the banks came to the support of the gov- 
ernment, and the great and constantly increasing 
strength of the banks fully proved that every 
man and every dollar of capital of the country that 
could be spared could have been readily reached 
by the currency then in existence, and of the value 
of coin ; so that when the nation came triumph- 
antly out of the struggle it could have immediately 
entered upon a career of unwonted prosperity, its 
monetary system being in a sound and healthy con- 
dition, with the great disturbing element of the 
past, slavery, wholly removed. To enable the gov- 
ernment to avail itself of the capital of the country 
precisely as the people had availed themselves of 
it, the law creating the Independent Treasury was 
so modified as to allow the use, in the place of 
coin, of the notes and credits of the banks. Their 
capital was a mere fraction of that of the whole 
country, or compared with that which the emer- 
gency demanded. They should have been upheld 
for a double purpose to enable them to serve 
more effectually as the agents and brokers of the 
government in the negotiation of its loans, and to 
sustain, in a sound and healthy condition, the in- 
dustries of the country. Not a dollar of their 
capital should have been touched that could not 
have been immediately replaced. Instead of pur- 


suing the policy of sustaining them a policy the 
wisdom cf which was so obvious, and which would 
have enabled the government to reach, at the par 
of coin, every dollar of the capital of the country 
exactly in the form required food, clothing, muni- 
tions, transportation, etc., etc. the $150,00x3,000 
loan negotiated with the banks at the outbreak of 
the war was transferred from them to the treasury, 
to be paid out in kind. If, instead of drawing the 
coin, the government had made its payments by 
requisitions by checks upon the banks of the 
three great cities which made the loan, allowing 
the holders of such checks to draw them in the 
form that best suited their convenience, not one 
dollar in fifty would have been drawn in coin. 
The checks would have been the instruments 
for reaching a corresponding amount of mer- 
chandise, or service, and would have been dis- 
charged by mutual offset at the Clearing Houses 
precisely as those drawn in the ordinary course of 
trade are discharged. In such cases no more gold 
would have been drawn in the operations of the 
government than, is drawn in those of merchants 
corresponding in amount. No sooner did hostili- 
ties break out than the flow of specie, for the first 
time since the discovery of gold in California, 
turned, in great volume, toward this country. This 
inward flow, but for the government notes, would 
have continued from the economies that would 
have been practised by the people through the 



whole period of the war, increasing in like ratio the 
reserves of the banks, and increasing in an equal 
degree their power to sustain both government and 
people. Instead of using the banks, as the public 
use them, for the purpose of reaching that which 
their bills represent, the government attacked them 
in their most vital point their reserves. These 
drawn, they necessarily suspended. Their reserves 
when drawn were paid out in the purchase of that 
which their bills represented, and which could have 
been reached by their notes without the use of a 
dollar of coin. Never was there a public measure 
of this country so fatal in its consequences and at 
the same time so wholly unnecessary. The natural 
and obvious would have been the far more conve- 
nient method, even for the utilization of the $150,- 
000,000, than that resorted to. But sinister councils 
prevailed. The banks being driven into suspension 
by the act of the government, no alternative, it was 
alleged, was left it, but to issue its own notes, which, 
having no proper constituent, fell speedily and enor- 
mously in price, increasing the present and future 
burdens of the government and the people in like ra- 
tio. They not only instantly turned the golden tide 
away fronrTthe country, bu't presently sent out of it all 
the accumulations of the past, as well as the prod- 
ucts of our mines, then the wonder of the world. 
The notes more than doubled the cost of the war, 
and from their demoralizing effect greatly pro- 
longed it. But this was by no means all. The 


banks, released from the only competent check upon 
their issues the obligation to pay specie imme- 
diately increased them in ratio to those of the gov- 
ernment. A wild carnival of extravagance and ex- 
penditure followed, only rivaled by that produced 
by the Revolutionary currency of this country or 
by the Assignats of France. For sixteen years has 
the poison been at work upon the frame of a great 
nation, which would have succumbed long ago had 
it not been in the vigor of its prime and possessed of 
enormous strength. If it still survives, it is stricken 
with a palsy, fatal alike to all life and hope ; while 
the restoration of its monetary system yet remains 
a problem far more difficult of solution than was 
the suppression of the mighty rebellion. 

Upon the return of peace, the traditions, at least, 
of the past, survived. No one for a moment enter- 
tained the thought that the greenbacks were to 
become the permanent currency of the country. 
The nation manfully, without a moment's delay, 
addressed itself to the work before it. The reduc- 
tion which immediately followed was, fortunate- 
ly, in great part of the currency. Had the same 
spirit continued, the nation would have 1been long 
ago rid of an evil which, after working incalculable 
mischief, seems now to defy all effort to remove. 
The following statement will show the amount of 
the public debt as it stood on the first of Sep- 
tember, 1865, when it had reached its maximum: 


Funded debt $1,109,568,000 

Matured " 1,503,000 

Temporary loan 107,149,000 

Certificates of indebtedness 85,093,000 

Five per cent. legal-tender notes 33,954,000 

Compound interest legal-tender notes 217,024,000 

U. S. 7.30 notes 830,000,000 

U. S. legal-tender notes 433,161,000 

Fractional currency 26,345,000 

Suspended requisitions 2,111,000 

Total $2,845,908,000 

The amount of the public debt of the United 
States for each year, from 1861 to 1865 inclusive, is 
shown in the following statement : 

Years ending Amounts. 

June 30, 1861 $90,580,874 

" 1862 524,176,412 ^ 

1863 1,1-19,772,139 

1864 1,815,784,371 

" 1865 2,680,647,870 

August 31, 1865 2,845,908,000 

In his Annual Report, December, 1865, Mr. 
McCulloch, then Secretary of the Treasury, set 
forth with great earnestness and convincing force, 
the vast evils that had already resulted from the use 
of a currency of government notes. They had, he 
urged, fulfilled their object, the suppression of the 
rebellion ; they were only resorted to as a tempo- 
rary expedient ; their constitutionality was only jus- 
tified by a supreme necessity which no longer ex- 
isted. To maintain them in circulation without 


provision for their payment, was, he declared, an 
act of virtual repudiation, which, if persisted in, 
would eventually be turned against the integrity of 
the national debt itself. The House responded 
with alacrity to his appeal, and on the i8th of De- 
cember, 1865, resolved that: 

"This House cordially concurs in the views of the Secre- 
tary of the Treasury, in relation to the necessity of contracting 
the circulation with a view to an early resumption of specie 
payments ; and we hereby pledge co-operative action to this 
end as speedily as practicable." 

The preceding resolution passed by a vote of 144 
in favor, to 6 opposed. In pursuance of its pledge, 
Congress, on the I2th of April, 1866, passed an 
act providing for the retirement of $10,000,000 of 
United States notes, within a period of six months ; 
and for their retirement, at the expiration of such pe- 
riod, at a rate not exceeding $4,000,000 each month ; 
the amount of notes then outstanding equaling 
$422,000,000. In obedience to this act, the Secre- 
tary immediately entered upon and continued the 
retirement of the notes, till their amount was re- 
duced to $356,000,000. Their further retirement 
was then suspended by an act passed on the 4th 
day of February, 1868, of which the following is a 

" That from and after the passage of this act, the author- 
ity of the Secretary of the Treasury to make any reduction of 
the currency by retiring or canceling United States notes, 
shall be, and is hereby suspended; but nothing herein con- 



tained shall prevent the cancellation and destruction of muti- 
lated United States notes, and the replacing of the same with 
notes of the same character and amount." 

The act of 1868 did not, as will be seen, repeal, 
but only suspended, the act of 1866. The retire- 
ment of the notes, it was urged by the mercantile 
and manufacturing classes, was producing a strin- 
gency in the money market, and should be sus- 
pended. The peculiar phraseology used was inten- 
tional. When the nation proceeded again with the 
retirement of its notes, it would not, it was said, have 
to enact a new bill, only repeal the one just passed. 
The principal object of the act, however, was to 
take away from the discretion of the Secretary, and 
vest in Congress itself, the direction of a matter of 
such transcendent importance as the regulation of 
the currency. There was not a suggestion at the 
time of the abandonment of a policy so definitely 
entered upon, or of the establishment of irredeem- 
able government notes as the permanent currency 
of the country. That there was no such purpose 
in view is fully shown by the act of March i8th, 
1869, usually termed "the Act for the Mainte- 
nance of the Public Credit," of which the following 
is a copy : 

." Be it enacted by the Senate and House of Representa- 
tives of the United States of America in Congress assembled, 
that in order to remove any doubt as to the purpose of the 
government to discharge all just obligations to the public 
creditors, and to settle conflicting questions and interpreta- 



tions of the laws, by virtue of which such obligations have 
been contracted, it is hereby provided and declared, that the 
faith of the United States is solemnly pledged to the payment 
in coin, or its equivalent, of all the obligations of the United 
States, not bearing interest, KNOWN AS UNITED STATES 
NOTES; and all the interest-bearing obligations of the United 
States, except in cases where the law authorizing the issue of 
any such obligations, has expressly provided that the same 
may be paid in lawful money, or other currency than gold 
and silver. But none of said interest-bearing obligations not 
already clue, shall be redeemed or paid before maturity, un- 
less at such time United States notes shall be convertible into 
coin, at the option of the holder ; or, unless at such time bonds 
of the United States bearing a lower rate of interest than the 
bonds to be redeemed can be sold at par in coin. 

"And the United States also solemnly pledges its faith to 
make provision, at the e'arliest practicable period, for the re- 
demption of the United States notes in coin." 

This measure passed -both Houses by large major- 
ities; the vote in the House being 118 in favor, to 
57 against. There was no pretense from any quar- 
ter that it was urged in favor of any-class. As the 
bonds had been purchased by means of the notes, 
it was suggested, as was natural, that they should be 
paid in them. The reply was as obvious as it was 
conclusive. Payment in the notes would be simply 
an exchange of an interest-bearing for a non-inter- 
est-bearing obligation of the government. Pay- 
ment in this mode would greatly reduce ^the 
present value of the security, and if the notes 
were to be a permanent currency, would be no 
payment at all ; it would be repudiation. To make 


the bonds payable in the notes would be to make 
the latter a permanent currency. Nothing was 
farther from the mind of Congress than such a 
proposition as this. The bonds, at the time, were 
the common property of the world ; their payment 
and that of their interest must be made in the 
money of the world. Had it been announced, at 
the time the bonds were put upon the market, that 
they would be paid in non-interest-bearing notes, 
not a dollar of them could have been sold. Con- 
gress cannot now, it was urged, take a ground that 
it could not have taken when the bonds were sold 
and the proper consideration received therefor. 

The great mistake of the act of 1869, was the 
pledge given that the notes themselves should be 
paid at their par value in coin. Congress proceed- 
ed upon the idea that these having a form similar 
to those of banks should like bank notes be dis- 
charged in coin at their nominal amount ; for- 
getting that bank notes are always issued upon a 
consideration equaling, or assuming to equal, their 
nominal value in coin. Instead of such consider- 
ations, the government notes were a forced loan, 
depending for their circulation as money upon the 
legal-tender clause. When issued, their price in 
gold did not equal two-thirds of their nominal 
value. When government came to deal with the 
matter of their retirement, the only thing to be 
done was to make provision for funding them at 


their value at the time, discharging them, after a 
certain day, of their legal-tender attribute. The 
proper mode of their retirement will be more fully 
considered in subsequent parts of this work. 

In .the panic of 1873 the Secretary of the Trea- 
sury, for the purpose of relieving a great pressure in 
the money market, reissued, in the purchase of 
bonds and for other purposes, about $26,000,000 of 
notes that had been taken in under Mr. McCul- 
loch's administration, increasing the amount out- 
standing to $382,000,000. This act was believed to 
be without warrant in law, and received the severest 
condemnation. The reissue of the notes, however, 
greatly strengthened the party of inflation, in con- 
sequence of which an attempt was made to raise 
their amount to $400,000,000, the alleged reason 
for their issue being the retirement of the three 
per cent, certificates, which had been held by the 
banks as a part of their reserves, and which were 
about to be paid off, the notes to be issued to take 
their place. This bill for such purpose promptly 
received the veto of the President, who was sus- 
tained by large majorities in both Houses. The 
veto again turned the tide strongly in favor of the 
retirement of the notes, and on the I4th of Janu- 
ary, 1875, Congress passed an act which, among 
other things, provided that 

"On and after the 1st day of January, A.D. 1879, tne 
Secretary of the Treasury shall redeem in coin the United 
States legal tender notes then outstanding, on their presenta- 



tion for redemption at the office of the Assistant Treasurer of 
the United States, in the city of New York, in sums of not 
less than $50. And to enable the Secretary of the Treasury 
to prepare and provide for the redemption in this act author- 
ized or required, he is authorized to use any surplus reve- 
nues from time to time in the treasury not otherwise appro- 
priated, and to issue, sell, and dispose of, at not less than par 
in coin, either of the description of bonds (4, 44, and 5 per 
cents.) of the United States describee! in the act of Congress, 
approved July 14, 1870, entitled 'An act to authorize the re- 
fundingofthe National Debt, 'withlikequalities, privileges, and 
exemptions, to the extent necessary to carry this act into effect, 
and to use the proceeds thereof for the purposes aforesaid." 

It is under the provisions of this act that the 
Secretary of the Treasury now proposes to resume. 

The capital defect of the acts of 1866 and 1875 
was the want of any adequate plan of resumption. 
In 1866, the business of the country was adjusted to 
a currency enormously inflated. On the first day of 
January, 1861, the notes and deposits of the banks, 
then upon a specie basis and in a sound condition, 
equaled $459,234,ooo,made up of $202,005,000 of 
notes and $257,239,000 of deposits. On the first 
day of January, 1866, five years after, and only a 
few months preceding the passage of the bill for 
the retirement of the government notes, the cur- 
rency in circulation equaled $1,418,572,000, made 
up as follows : 

Notes of the National and State Banks $282,687,000 

Deposits in the National Banks 563,885,000 

Deposits in State Banks 150,000,000 

Legal Tender notes .' 422,000,000 

Total $1,418,572,000 


There were at the same time outstanding $159,- 
912,000 of compound-interest notes not included 
in the preceding statement. The increase of the 
currency of the country within the period named 
equaled $959,338,000, not including interest-bear- 
ing notes ; the rate of increase exceeding two hun- 
dred per cent. At the same time, one-third of the 
country was almost wholly without a currency of 
any kind. When the act for the retirement of the 
government notes was passed, the amount of cur- 
rency required for the operations of the country 
could not have greatly exceeded that in circulation 
in 1861. A return to specie payment at that time 
would have required the retirement of currency 
equaling at least $600,000,000. There could not 
have been so large an amount of capital in the 
country to be symbolized at the close as at the 
outbreak of the rebellion. When a contraction of 
the currency is inevitable, contraction of prices 
and of all industries and enterprises is equally in- 
evitable. The act of 1866 consequently had the 
effect to put the country upon the rack for a period 
of at least nine years, during which there was to be 
a steady retrocession in everything like the ap- 
parent results of real prosperity. During that 
whole period the notes were still to be legal tender, 
at the same time decreasing in amount. So long 
as they remained legal tender, the banks, at least, 
would make no provision for resumption. A dead 
lock was inevitable, with no adequate provision for 



a currency suited to the wants of production and 
trade. Standing alone on the statute book, no 
provision could have been more absurd, and it was 
swept away by the first adverse breeze. 

The amount of paper money, per head of popu- 
lation, in the United States in 1860 a year of re- 
markable activity and prosperity equaled fourteen 
dollars. In 1866, five years thereafter, it had in- 
creased to forty-one dollars per head, an amount 
nearly three times greater. By far the larger p*art 
of this increase was pure inflation. The conse- 
quences were the tremendous speculative move- 
ments which followed, and which resulted, among 
other things, in the construction, within a very few 
years, of over 40,00x3 miles of railroad, in which, 
within a period of ten years, $1,500,000,000 were 
unproductively expended. The depression which 
followed was but the natural reaction of the pre. 
vious ill-directed and exhausting activity. The 
thing of all others which we have now in too great 
abundance is our paper money. Its holders dare 
not invest it in any productive enterprise, pre- 
ferring to put it into government bonds, bearing 
the unprecedentedly low rate of interest of four per 
cent. It is this excess of paper money that is to- 
day eating up the means of the great mass of the 
people. It is not capital put to any productive 
use. It still exacts, as if it were capital, interest on 
its use. What wickedness, by increasing its amount, 


to add still further to its power to exhaust and con- 

The act of 1875 was equally faulty with that of 
1866 in not providing an adequate method for the 
retirement of the notes. The more alarming fea- 
ture about it was its indication of the tremendous 
revolution that had taken place in public opinion 
in reference to their character. They were no 
longer to be retired as a currency radically vicious, 
and resorted to only as a temporary expedient, but 
were to be permanently maintained in circulation as 
the basis of all other currencies, supported by an 
amount of coin assumed to be sufficient to main- 
tain them at par. The act of 1875, consequently, 
instead of being an act for the retirement of the 
notes, was only an act placing the country per- 
manently on the basis of irredeemable government 
currency. All subsequent legislation has only 
confirmed the effect of this act. The act of 1866 
contemplated the retirement, by payment, of the 
notes; that of 1875, their maintenance in circula- 
tion, but at the par of coin by an adequate pro- 
vision of the latter.. The only problem now left 
for decision was the amount. In casting about 
them, the government officials saw that banks 
maintained specie payment by a provision in coin 
equaling, say, 33^ per cent, of their liabilities, and 
they fixed upon that as the ratio to be provided 
to maintain the government notes at the par of 


coin, wholly overlooking the fa.ct that it is not 
the coin which the banks hold that retires their 
liabilities, but their bills receivable ; their coin being 
held to take in such as are not returned by their 
bills, and to meet contingencies or extraordinary 
calls to which they are liable. Their reserves 
are held for precisely the same object that the re- 
serves of merchants are -held. So long as the 
former conduct their business properly that is, so 
long as they discount only such paper as represents 
real transactions in consumable merchandise, and 
which has a short time to run no considerable 
portion of their reserves will be drawn ; perhaps 
not one per cent, of the amount of their issues. As 
already remarked, it is no part of the object of a 
bank to lend coin this can be loaned as well with- 
out as with a bank ; but to symbolize merchandise 
in the hands of the public. In its operations the 
value of the thing symbolized must always equal 
that of the symbol, or the bank makes a corre- 
sponding loss ; or is to an equal extent a disturbing 
element or force in production and trade. If gov- 
ernment would, like banks, issue a convertible cur- 
rency, the thing it symbolizes must equal the sym- 
bol in value. As it does not attempt to symbolize 
merchandise in the hands of the public, only coin 
in its own possession, the amount of the coin must 
equal its currency, in order to maintain the latter 
at par. In other words, government, if it would 
turn banker and issue a convertible currency, must 


provide the proper constituent, lodged either in the 
hands of the public, or in its own vaults. 

The present legal-tender currency being held 
to be well issued, the only question dividing the 
country is the amount ; the conservative wing in- 
sisting that the present amount is the proper limit, 
with partial provision for its conversion into coin, 
to maintain it at par; the radical wing insisting 
upon an unlimited issue, or an issue at least equal- 
ing the amount of the national debt, with no 
provision for conversion into coin. No one has a 
better right to speak for the conservative wing than 
the Hon. Mr. Morrill, Senator from Vermont, Chair- 
man of the Committee on Finance in the Senate, 
and for many years Chairman of the Committee of 
Ways and Means of the House. In a speech deliv- 
ered in his place on the 2ist of May, 1878, he said : 

" The contraction of paper money hitherto has been almost 
wholly imaginary, and will surely have lost its terrors when 
contraction, real or fanciful, wholly disappears in expansion, 
especially when it shall be seen that all the dykes are broken 
down, and both gold and silver, long pent up, find an unre- 
stricted outlet to fertilize every part of our country. * * * 
Let us hail the resumption now imminent as an event, how- 
ever brought about, that may quicken the pulse of the nation 
and start us once more on the highway of national pros- 
perity. * * * The mere fractional premium now remain- 
ing on gold is likely soon to disappear, unless that result is 
thwarted by a rash attempt to do by legislation what will so 
much more surely be accomplished, naturally, through the 
laws of trade. * * * If we only permit coin to be still re- 



ceived for duties on imports, it is equally certain that the 
'amount will exceed the current demands for interest on the 
public debt." * * * 

The liabilities of the Treasury, to be met upon 
resumption, were stated by the Senator to be $430,- 
039,516; of which $346,680,016 consists of notes, 
$55,044,500 of coin certificates, and $28,315,000 of 
currency certificates. Its reserves, to meet these 
liabilities, are : coin in the Treasury, $156,031,236 ; 
to be received under the recent loan, $40,000,000 ; 
currency, $39,478,141. The reserves, consequently, 
will equal 53^ per cent, of the liabilities. The old 
safe ratio, he tell us, of reserves to be held by the 
banks equals 33^ percent, of their liabilities. Gov- 
ernment, consequently, is nearly twice as strong ; 
but there is no probability that it will be called upon 
to pay out even one-sixth of its reserves. Its notes 
are, he tells us, in " broadcast, healthy circulation," 
and " cannot be massed in large amounts for re- 

" Some question has arisen as to the ability of the banks to 
resume at the time appointed for resumption to take place on 
the part of the government. But the character and resources 
of these banks make it certain that there will be neither hesi- 
tation nor difficulty about the matter. * * * Diffused over a 
broad country, from the Atlantic to the Pacific, and held in 
the pockets of millions of people, these notes cannot be gath- 
ered and assorted in formidable amounts to be presented for 
redemption. The business of presenting bank notes will not 
pay when gold is only % of i per cent, premium, and when 
there will always remain the option of redemption in legal- 


tender notes or silver coin ; but whatever may be presented 
will surely be promptly paid. 

" There are now outstanding and unredeemed of national 
bank-notes, $300,502,350. The fund to redeem with is : 

Specie $54,546,201 

United States legal-tender notes on 

hand, 84,478,733 

United States legal-tender 5 per cent, 
redemption fund, .... 15,072,726 


" But the banks have a much larger reserve available at a 
pinch, or in any great emergency. They have deposited with 
the Treasurer of the United States, $343,385,350 in bonds, 
for the security of these same notes, which will at any mo- 
ment command the best money of the world at home or 
abroad. * * * 

" It may be still said that there are no visible means of 
meeting a sudden -demand made for the large amount of de- 
posits ; but it can be answered that even in times of severe 
stringency the aggregate amount of deposits seldom suddenly 
changes, as lenders only become more cautious. Bank de- 
posits are diminished in good and prosperous times when 
nobody is afraid. It can be further answered that large de- 
mands for the payment of deposits have never been made, 
except upon banks of deposit having no circulation, and pro- 
bably never will be, for the sufficient reason that the deposits 
of banks belong to their customers or to their stockholders ; 
and such persons will not pull down the pillars of their own 
temples, when they would be the foremost to be buried or 
crushed beneath the ruins." 

In conclusion he stated that "nearly all the serious obsta- 
cles to resumption had been surmounted ; that whether or 
not there has been heretofore any contraction of the money 
of the country, there will be none after resumption ; for the 



reason that resumption will resurrect more than two hundred 
millions of actual coin, and give vitality to the whole volume 
of money in circulation." 

So much for a currency of government notes in 
1878. The argument of the Senator, it will be 4 
seen, is but a repetition of that of the Secretary of 
the Treasury before his own committee. There is to 
be no retirement, but " equivalency." Let us see 
what such a currency was in anticipation sixteen 
years ago. The Senator was then a member of the 
House of Representatives. When the bill author- 
izing the first issue of notes was before the House, 
he made on February 4th, 1862, a most able and 
earnest speech in opposition, from which the fol- 
lowing extracts are given : 

"The subject of issuing $150,000,000 of paper currency, 
and making it a legal tender by the government at a single 
1x>und the precursor, as I fear, of a prolific brood of prom- 
ises, no one of which is to be redeemed in the constitutional 
standard of the country could not but arrest my attention, 
and having strong convictions of the impolicy of the measure, 
I should feel that I utterly failed to discharge my duty if I did 
not attempt to find a stronger prop for our country to lean 
upon than this bill a measure not blessed by one sound pre- 
cedent, and damned by all. * * * 

" If, by the provisions of this bill, we cut ourselves off from 
all other resources, it is to be considered how much could be 
realized from this, in my judgment, the weakest resource 
within our grasp, which is the power of a bank of issue, with- 
out any capital, and not even specie enough to tender the 
odd change. It is an experiment to inject, by a governmental 


force-pump, into the arteries of commerce a new currency, 
when the arteries are already filled. * * * 

"I object to this bill on the ground, as I conceive, of its 
utter impolicy. I admit that from the contracts entered into 
many of which, now due, I regret have not been paid as 
promptly as they deserved to be, and from the heavy monthly 
disbursements to our army, that the government can flood 
the country with even one hundred and fifty millions of paper 
dollars. But from that moment you would vastly increase 
the cost of carrying on the war; prices would go up, and 
the addition we should pile upon our national debt would 
prove that it might have been even wiser to have burnt our 
Paper dollars before they were issued. The inflation of the 
currency would be inevitable. In ordinary times few com- 
prehend the Archimedean leverage of a very few millions 
added to or subtracted from the currency of a nation ac- 
tively engaged in the affairs of the world. In the former 
case it produces a crisis and general bankruptcy, and in the 
latter it puts every speculator on tiptoe to buy out his neigh- 
bor his horse, his ox, his ass, or anything that by keeping 
over night will put money in his purse. Property becomes as 
volatile as alcohol at boiling heat, and cannot be kept with- 
in its ancient boundaries. The poor man accustomed to 
butcher s meat, and who has not counted tea and coffee as 
luxuries, suddenly finds their daily use beyond his means. 
The ecstasy of an inflated currency is enjoyed by the few 
only, and these are cruelly punished, when the gaseous influ- 
ence subsides. * * * 

" I maintain that the bill, as reported by the Committee of 
Ways and Means, should not pass, because it will infinitely 
damage the national credit; because it will cut off all other 
chance of supplies ; because it will reduce our standard of 
legal tender already sufficiently debased ; because it will in- 
flate the currency, and increase many fold the cost of the 
war j because it would slide into the place of proper taxa- 



tion ; because, as a resource, it must ultimately fail, and 
tend to a premature peace ; because it is a question of doubt- 
ful constitutionality; because it is an ex post facto law, 
immoral, and a breach of the public faith ; because it will 
at once banish all specie from circulation ; because it will 
dampen the ardor of our men at home as well as soldiers in the 
field ; because it will degrade us in the estimation of other 
nations ; because it will cripple American labor, and throw 
at last larger "wealth into the hands of the rich j and be- 
cause there is no necessity calling for such a desperate rem- 

Is it possible that the same man delivered these 
two speeches? One such an indignant and elo- 
quent protest against " a currency not blessed by a 
single -precedent, but damned by all;" and the 
other an equally emphatic support of a currency 
similar in kind; not of $150,000,000, but of $346,- 
000,000 ! a currency which is at last to usher in 
our financial millennium ! 

The speeches of the Senator on the two occa- 
sions not only show the tremendous revolution 
which has taken place in the sentiment of the 
country, but the almost insuperable obstacles qp- 
posed to all efforts at reform. The cause is far 
weaker in the hands of its friends than in those of 
its enemies. The arguments of the latter can 
be easily combated, while those of the former, ap- 
parently so reasonable, lead in the end to results 
precisely similar. According to the Senator, $346,- 
000,000 of government notes are good money. 
As there is no recovery of the country from its 


depressed condition, the question naturally sug- 
gests itself, would not an increase of this good 
money to $400,000,000 help to start things ? Who 
ever heard of there being too much of metallic 
money? A nation is always rich in ratio to its 
amount. If not wanted as currency, it is mer- 
chandise for export. There never can be too 
much symbolic money, as this only measures the 
amount of merchandise fitted for consumption, is 
the instrument for reaching it, and disappears 
when it is reached. Such money is at the par of 
gold for the reason that it secures whatever gold 
as currency can secure even gold itself. After 
government money is to be raised to the par of 
gold, how can there be too tnuch of this? Suppose 
the present amount to be increased to $700,000,000, 
maintained at par by a provision of $250,000,000 
in coin. Government would be the gainer by an 
amount equal to the interest on $450,000,000, the 
excess of the notes and coin, while the country 
would have $350,000,000 more capital. The con- 
clusion, in the present state of the popular mind, is 
irresistible. The premises of the Senator granted, 
all is granted, at least with a proportional increase 
of coin reserves, that the most ardent greenbacker. 
could desire. 

To all this must be opposed the utter incom- 
petency of government to issue a convertible or 
useful paper money of any kind. What is a con- 



vertible and useful currency ? a question that can 
never be too often asked or answered in the pres- 
ent state of the public mind. Instruments arising 
out of the operations of production and trade ; this 
is all. When a farmer gives an order for the deliv- 
ery of an ox or a horse, he gives that which is pre- 
cisely the same in kind as the notes of specie-pay- 
ing banks. Where the order directs the delivery 
to the bearer of the thing described, it is currency, 
precisely as much so as the notes of specie-paying 
banks. If the order be for an ox or a horse which 
the drawer cannot convey, he must make good the 
amount in coin, or its equivalent. The use of such 
currency orders for capital is the prime condi- 
tion of anything like an extended production and 
trade. Society, as at present constituted, cannot 
exist without them. When the thing is reached 
the instrument has fulfilled its mission, and has no 
longer any force. It cannot, without a new sanc- 
tion, go on transferring ox after ox or horse after 
horse, any more than can the receipt for one dollar 
stand for the payment of thousands. The moment 
the connection is severed between the order and 
the constituent, the former falls to the ground. 
Government money is the order without the ox or 
the horse without the constituent and would in- 
stantly fall to the ground but for the fact that 
being legal tender, it must be accepted as the 
equivalent of an ox or a horse which may have no 
existence whatever. It is an active force or power 


to which nothing corresponds. It inflates prices 
for the reason that there are now two dollars to 
offer for the merchandise upon the market where 
there was one before. When accepted and used, 
it is still as much in use as ever. It is always 
the same in quantity, even if there were not a dol- 
lar's worth of merchandise in existence. The rea- 
son why a symbolic currency, no matter how great 
its amount, has no tendency to produce specula- 
tion and raise prices is that its use, by reaching the 
thing symbolized, retires it. The symbol and the 
substance disappear by the same act. What would 
be the condition of a community were every mem- 
ber of it allowed to issue, and could compel the ac- 
ceptance of, orders for oxen and horses of which he 
had neither the possession nor the right of posses- 
sion, and which might have no existence whatever? 
We need not wait long for a reply. All the opera- 
tions of society would soon be involved in inex- 
tricable confusion and loss. Government assum- 
ing to issue such orders without any adequate 
provision therefor, and to compel their acceptance, 
the result is the same as if every individual pos- 
sessed and exercised the same privilege and power. 

According to the Secretary of the Treasury 
and the Chairman of the Finance Committee of 
the Senate, when government has resumed on a 
provision of $120,000,000, or, including silver, of 
$140,000,000 in coin, the banks and the country 


have resumed ! Resumption means the establish- 
ment of a proper relation, not only between the 
metallic and paper currency of the country, but a 
proper relation between the metallic currency and 
the business and wealth of the country. The 
banks and the people must hold reserves as well 
as the government. Taking the Senator's ratio of 
33 1 A P er cent., the reserves to be maintained by the 
banks should equal say, $440,000,000 their circu- 
lation, including deposits, equaling 1,448,000,000,* 
as follows : 

National bank notes $314,000,000 

" " deposits 626,000,000 

Deposits of State banks and bankers 508,000,000 


The government notes would bring up the total 
circulation to $1,794,000,000. These need not be 
counted, for the reason that when government re- 
sumes it ceases to be an issuer of currency. When 
the banks resume their circulation willbe so much 
reduced that they will not have to hold over $300,- 
000,000 coin. If such an amount were held by them, 
and it included all the coin in the country, they 
could not maintain resumption 24 hours. The proper 
order of resumption is for the people to resume 

* In addition to the liabilities of the national and State banks 
and bankers, are $843,000,000 of deposits in savings banks, making 
a total of demand liabilities of all our banks of $2,291,000,000. See 
Finance Report for 1877, p. 142. 


first, so as to be in position to sustain the banks, 
instead of having every inducement to attack them. 
In 1860, the total circulation of the banks of this 
country equaled $459,000,000. They held a little 
over $100,000,000 in coin. There were fully $150,- 
000,000 of coin, in addition, in circulation. The 
total percentage of coin to the bank circulation 
equaled fifty-four per cent. We must, before we 
are upon a sound basis, have a similar proportion 
of coin to our paper money the banks hold- 
ing only the smaller proportion of the former. 
The most trustworthy estimates place the amount 
of coin in France at $1,200,000,000, of which 
$500,000,000 is held by the Bank of France. The 
population of that country equals only three 
quarters that of our own. The total amount of 
coin in England, whose population is only about 
three - fifths of our own, equals $500,000,000. 
The Germans, under their new system, have 
already issued coins to the value of $477,237,600, 
and still have old demonetized coins of the esti- 
mated value of $76,000,000 to be taken in. Our 
country is much more populous and vastly richer 
than Germany ; our paper currency is thrice greater. 
The operations of banks only reflect those of the 
people. Those of the latter are far greater in amount, 
and must be supported by corresponding reserves 
from which the banks must draw their own. In 
England, France, and Germany, coin in the hands 
of the people is the great reservoir from which sup- 


plies are drawn to meet sudden emergencies. The 
only way in which tendencies to speculative move- 
ments can be checked is to compel the public to 
pay their debts in coin by the refusal of the banks 
to make further discounts. That done, their bills 
must, in part at least, be paid in coin. We have 
been so long upon a false system of currency that 
we have lost all sense as to what is necessary to 
constitute a good one. In our present efforts at 
resumption we are like architects who would erect 
a Saint Peter's or a Saint Paul's cathedral upon the 
support of a single pile ! 

The near coincidence in price of gold and gov- 
ernment notes has nothing to do with the value of 
the two. With our legal-tender currency, gold coins 
are merchandise as much as are iron or lead. All 
kinds of merchandise, from an absence of demand, 
have fallen within the past three years very largely 
in price, in ratio to greenbacks. Gold has fallen 
much less relatively than other articles. It would 
be as absurd to say that the present price of gold 
and greenbacks expresses their relative value, as it 
would to say that the price in greenbacks of a great 
many articles indispensable to society, but which 
are produced and sold at a loss, expresses a fixed 
relation between the two. The time will come when 
the relative price of notes and many articles of 
merchandise will change greatly and permanently. 
Gold is one. This cannot now be loaned as money 


at anything like the rate for greenbacks. Every 
one now expects that resumption will speedily take 
place. Every one consequently prefers to hold 
greenbacks to gold for the better use that can be 
made of them. No one cares to pay one per cent, 
as the price of conversion of paper into gold, when 
he will be presently able to make the conversion 
without paying anything. As it is, he is better off, 
apparently, with notes than gold. The same per- 
son may not wish to exchange greenbacks for iron, 
although it may speedily be seen that iron is worth 
a great deal more than its present price in the 
former. As it is, the public have wholly thrown 
aside all consideration of values, and infer that of 
greenbacks from their present accidental approach 
to gold. Their value depends wholly upon the pro- 
vision for their redemption. They are apparently 
worth at least 35 per cent, of their nominal amount, 
for the reason that such proportional provision has 
been made for their retirement. To such value is 
to be added the provision yet to be made. Should 
the additional 65 per cent, be made so as to be 
available on the 1st day of January, 1882, their 
value would equal their nominal amount, less in- 
terest up to the time of their payment. In other 
words, their price would be their value established 
by the rules by which the value of all other kinds 
of property is established. It will soon be seen, 
however, that no connection can be established be- 
tween the notes and coin collected in the Treasury. 



The notes with the provision to be made for them 
will not come to the par of gold ; nor will silver 
coined at 10 per cent, below its bullion value. The* 
doors of the Treasury will not be unlocked. This 
point reached the inability of the government to 
resume upon the provision proposed comes the 
real tug of war. If the government has sufficient 
manliness it will say : " We have been mistaken ; we 
thought a part would pay a whole ; we must now 
take time to prepare for the whole." Upon the 
action taken upon such an issue depends the 
answer to the question, Will the country resume by 
a retirement of its notes by payment in some form, 
or by repudiation ? an act which will necessarily in- 
clude the practical repudiation of the public debt, 
for the reason that this will be speedily made pay- 
able in the notes.* 

* It is hardly necessary to give a detailed account of the " Con- 
federate" currency. The amount issued equaled $672,805,000, as 
follows : 

Issued in Amount. 

1861 $161,500,000 

1862 123,000 

1863 511,182,000 

Total $672, 805 .coo 

The currency ceased to have any value after the surrender of Lee. 
Its effect was to ruin every bank and savings bank in the South. 
After their terrible experience, is it not incredible that the people 
of that section should insist upon the maintenance of a currency, 
the same in kind as that which ruined them, and which may repeat 
to them the experience of the past ? 


The following statement shows the depreciation of that currency 
at different periods : 

, Period. Value per $100. 

January i, 1862 $ 120 

July I, " 190 

January I, 1863 310 

July I, " 700 

January I, 1864 1,800 

July i, " 1,700 

January I, 1865 3,400 

April 10, " 5,500 


THIS party may be considered as formally organ- 
ized, distinct from all others, by a general con- 
vention of delegates held at Toledo, Ohio, on 
the 22d of February, 1878, at which, among other 
things, the following preamble and resolutions were 
adopted : 

Whereas, Throughout our entire country the value of real 
estate is depreciated, industry paralyzed, trade depressed, 
business incomes and wages reduced, unparalleled distress 
inflicted upon the poorer and middle ranks of our people, the 
land filled with fraud, embezzlement, bankruptcy, crime, suf- 
fering, pauperism, and starvation ; and 

Whereas, This state of things has been brought about by 
legislation in the interest of and dictated by money-lenders, 
bankers, and bondholders j and 

Whereas, The limiting of the legal-tender quality of green- 
backs, the changing of currency bonds into coin bonds, the 
demonetization of the silver dollar, the excepting of bonds 
from taxation, the contraction of the circulating medium, the 
proposed forced resumption of specie payments were crimes 
againt the people, and, as far as possible, the results of these 
criminal acts must be counteracted by judicious legislation ; 

Therefore we assemble in National Convention, and make 
a declaration of our principles, and invite all patriotic citizens 
to unite in an effort to secure financial reform and industrial 
emancipation. The organization shall be known as the 

10 217 


"National Party," and under this name wew ill perfect, with- 
out delay, national, State, and local associations to secure the 
election to office of such men only as will pledge themselves 
to do all in their power to establish these principles : 

First It is the exclusive function of the General Govern- 
ment to coin and create money, and regulate its value. All 
bank issues designed to circulate as money should be sup- 
pressed. The circulating medium, whether of metal or 
paper, shall be issued by the government, and made a full 
legal tender for all debts, duties, and taxes in the United 
States at its stamped value. 

Second There shall be no privileged class of creditors. 
Official salaries, pensions, bonds, and all other debts and ob- 
ligations, public and private, shall be discharged in the legal- 
tender money of the United States, strictly according to the 
stipulations of the laws under which they were contracted. 

Third Resolved, That the coinage of silver be placed on 
the same footing as that of gold. 

Fourth Congress shall provide said money adequate to 
the full employment of labor, the equitable distribution of its 
products, and the requirements of business, fixing a minimum 
amount per capita of the population as near as may be, and 
otherwise regulating its value by wise and equitable pro- 
visions of law, so that the rate of interest will secure to labor 
its just reward. 

Should Congress, to relieve the distresses of the 
country, provide for an issue of its notes in place 
of those of banks, the effect would be precisely the 
same, so far as production and trade were con- 
cerned, as if it should, without the possession of a 
dollar of exportable capital of any kind, undertake 
to draw all the bills of exchange between the 
United States and other countries ; prohibiting the 


drawing of a single one by parties possessed of 
such capital. How long would it be before the 
commerce and industries of the country would be 
in such confusion, and so reduced that the laborer 
who now gets one dollar a day would get but half 
a dollar ? Is not the answer palpable to every one 
in the land? 

Suppose government to undertake, as is de- 
manded, to issue an amount of its money adequate 
to secure full and remunerative wages to labor, say 
$1,000,000,000, how is it to be issued? The reve- 
nues to-day exceed the expenditures ; so that it 
could not be got out in their payment. It is not 
to be given away. If it were, it would have no 
purchasing power whatever. Those who received 
it as a gift would have to give it away. No one 
expects to receive it, or pay it, at any other rate 
than its market value in gold. No one will receive 
it, or pay it, at any other value. If issued at all, it 
can be issued only in exchange for, or payment 
of, the public debt. This, in fact, is the method 
proposed. Those who would receive it would be 
the rich. Not a dollar would come, in the outset, 
into the hands of the masses of the poor and 
never, unless paid for at its full value. They would 
be compelled to receive it at its nominal value for 
everything they might have to sell. To the na- 
tural effect of .such money, which always exhausts 
a people in ratio to its amount, would be added 
that due to the withdrawal of the rich from the 


operations of production and trade among a peo- 
ple who had shown themselves unfit to be longer 
trusted with the money of others. As their indus- 
tries would necessarily decline, those dependent 
upon labor would be compelled to live upon their 
past acquisitions to sell day by day something of 
what they possessed. There would be none who 
could buy but the rich, with the very money issued 
to them in exchange for their bonds. It would 
not be long before all the valuable property of the 
nation would in this way come into their hands ; 
while the money of the country, which would be 
all the poor would have to show for what they pos- 
sessed, would, when the crisis came, be almost 
wholly in their hands. All this is a matter of 
proof of history. It was so under the Continental 
Currency ; it was so under the French Assignats ; 
it must be so by the force of natural law. The 
people may so order it that government money 
shall pay debts, both public and private ; but they 
cannot so order it that they shall reach a single 
dollar of this money without paying its full value 
in coin ; nor can they by any power avoid receiv- 
ing it, or prevent it from becoming, where the 
amount is large, utterly worthless on their hands. 
Our money, from the smallness of its amount, and 
the expectation of its payment, is not greatly de- 
preciated ; but the transfer, due to its use, of the 
property of the poor and middle classes to the rich 
was never going on at a more fearful rate than in 


this country at the present time. It only needs a 
large increase of such money to make such transfer 
speedy and complete. The whole attention of the 
laborer, from morning till night, is necessarily riv- 
eted upon his work. He has neither the means nor 
the opportunity of forecasting the future or of fore- 
stalling the market, but takes, at the close of the 
day, his accustomed dollar for it will be a long time 
before the rates of his wages rise in consequence of 
the issue to find that it will only procure for him 
one-half the accustomed amount of food and cloth- 
ing. If, as is demonstrable to the most ordinary 
understanding, the laborer always receives a green- 
back at its value in coin, and if from the fluctuation 
in its value he always runs the risk of loss by taking 
it, and may lose its whole value, why should he 
not demand to be paid in coin, instead of green- 
backs at their value at the time in coin ? There 
can be but one answer to this. A greenback cur- 
rency cannot by any possibility benefit the labor- 
ing man. It is always harmful to him ist, by in- 
creasing competition, and reducing his proper share 
of merchandise upon the market ; 2d, by its effects, 
first by stimulating, then by paralyzing all the 
industries of the country, in consequence of which 
he loses all opportunities for labor.. History is 
fulL of examples of such currencies. There never 
was one that was not an unmitigated evil, and 
never one -issued on a large scale that did not 
end in repudiation, the necessary result of the im- 
poverishment and ruin it caused. 


Government, according to the Greenback party, 
is to undertake to provide such an amount of its 
notes that labor is to receive its adequate reward ; 
in other words, society is to provide the means for 
the support of every one who may claim to be out 
of work. If so, those to be provided for will soon 
vastly outnumber all others. The real question is 
whether we shall, without delay, turn ourselves into 
a nation of communists attempt, we should say, 
for all such propositions are but the dreams of 
madmen. There might be some apology for an at- 
tempt to realize communism by means of indus- 
trial organizations ; but an attempt to realize it by 
means of an unlimited issue of paper money, would, 
instead of making us a nation of communists, make 
us a nation of cutthroats, preying upon each other, 
till society became so exhausted as to be only too 
glad to escape from its fearful condition at any 
price, even that of a grinding despotism. Are the 
property holders, the farmers, those upon whom, in 
this sorely taxed land, rest the burdens of govern- 
ment and society, prepared to accept, or tolerate 
even a creed, the effect, and on the part of the 
leaders the object, of which is to encourage the 
more lawless and dangerous passions of our nature, 
and which,if triumphant, cannot fail to subvert 
alike all property and order ? 

While communism is one of the greatest dangers 
that can menace a State, it is always the product of 



bad government or of some great social wrong. 
The people never rise up against the government, 
against the existing order of things, without great 
provocations. If they did, both government and 
order would be impossible. There may be great 
want and great suffering, but these are quietly borne, 
and by none more patiently than 4?y the poor, pro- 
vided no one appears to be justly consurable for 
their distresses. The people of France, previous to 
the great revolution, had for centuries borne, with 
a patience that exceeds belief, the most terrible 
exactions of a depraved and remorseless govern- 
ment. Their subsequent excesses only measured 
the extent of their wrongs. In the United States, 
we should not have heard one word favoring com- 
munism, but for our currency. That is the sole 
cause. The effect will constantly increase in mag- 
nitude and power so long as the cause remains. Re- 
move that, and every tract of communism will al- 
most instantly disappear. Prosperity will instantly 
return, A demand will at once be created (or 
labor. The great mass now so clamorous will be 
only too happy at such a solution of the question. 
Among our own race, at least, a community that 
has no just cause of complaint is always orderly 
and docile. With it a sense of duty is the para* 
mount law. There can be no prosperity where 
an enforced currency is the basis of the whole 
monetary system of the nation. Unless we ad- 
dress ourselves to the removal of the cause, the 


movement now so formidable will rapidly gain in 
strength, with constantly increased demands de- 
mands which, if complied with, will be the des- 
truction of the very conditions through which alone 
relief can come. 

As there is no" instrument or contrivance so 
potent as a currency of government notes for 
brutalizing a nation, its issue always becomes the 
occasion on which desperate and revolutionary 
characters, by arousing the passions of a dis- 
tressed and distracted people, and by exciting a 
war of classes, the most terrible and most sanguin- 
ary of civil conflicts, rise to positions of influence 
and power. Never was there such an opportunity 
as that afforded by the Assignats of France, which 
far exceeded in amount and effect all examples of 
the kind. Never did such cruel and remorseless 
demagogues appear on any stage of action as those 
who inflamed the populace of Paris, and urged 
them to their final destruction. The same condi- 
tions, though less in degree, exist in the United 
States. A period of unexampled distress, due to 
our currency of government notes, prevails. The 
readiest and most popular explanation is that it 
has been caused by the avarice and selfishness of 
the rich. Vast masses are in debt. Their creditors, 
who demand payment, first robbed them by the 
conversion of currency into gold bonds ; then by 
the act demonetizing the silver dollar; then by 
that for the resumption of specie payments ; then " 



by the contraction of the currency. All these 
measures were conspiracies were crimes of the 
rich against the poor, and are to be resisted by 
every means in the power of the latter in the last 
resort, by revolution. 

" If I were in debt five years ago," said Mr. Bland, author 
of the bill remonetizing silver, to a delegation of New York 
; bankers and merchants who visited Washington to remon- 
strate against its passage, " a hundred dollars, the wages of 
my labor, worth one dollar a day, would pay the debt. To- 
day, by the reduction of the volume of the circulating me- 
dium, you have so reduced prices, till labor is worth only 
fifty cents a day ; and instead of paying with a hundred days' 
work, it now takes two hundred. That is the complaint. 
These are plain propositions, and the West can understand 
them. * * * And having contracted debts on a paper 
basis at inflated prices, you now ask them to pay you at con- 
tracted prices ; you take two bushels of wheat, whereas you 
gave them but one. I now want to say to you, with all due 
deference, that you had better accept this proposition " (to coin 
silver at 10 per cent, above its bullion value). " If I know the 
people I represent, and I think I do, throughout all fhe West 
and we had a little experiment last summer " (the great rail- 
road riots), " when there was an uprising from one end of 
the Union to the other promises were made that this finan- 
cial matter should be attended to, and that these people 
should have some relief ; and these people went home, and 
are looking to Congress. 

" But I tell you that if you put on the screws much further, 
and reduce this people much further to the necessities, when 
their uprising comes again, there is no power in this govern- 
ment to put it down again, and instead of your bonds being 
paid in gold, they will be wiped out with a sponge!" 



The great indictment against the conspirators 
who are seeking to rob the people and to reduce 
them to slavery, was drawn up by Mr. Voorhees, 
Senator from Indiana, wHo in his place in Congress 
on the 2d of May, 1878, said: 

"The object of the law (demonetizing silver) was soon 
found to be not the impossible task of procuring a sufficient 
amount of the precious metals to form the basis of specie re- 
sumption, but simply to reduce, retire, cut down, and destroy 
the amount of money in circulation in the hands of the peo- 
ple, until it approximated the comparatively small amount of 
gold which we had in our possession, or which it was possi- 
ble for us to obtain. In pursuing this purpose the amount of 
human misery, of individual wretchedness, of destitution, of 
crime, of vice, of the destruction of property values, of the 
overthrow of wealth-producing establishments of industry, is 
simply beyond the power of language to describe. It is con- 
ceded on all hands that in this attempt to reduce the volume 
of our circulation, in order to reach what is called a specie 
basis, the shrinkage in the values of property that is to say, 
the absolute destruction of values has reached the enor- 
mous and appalling sum of over $10,000,000,000. One-fourth, 
at least, of the property of the United States has been abso- 
lutely confiscated. It is not wonderful, therefore, that from 
the highest to the lowest intelligences the victims of this 
vast national crime should have very quickly discovered the 
source of their calamities. * * * 

" The servile castes of the East Indies, with a blind and 
ignorant faith, worship the Juggernaut, and feel no resent- 
ment when mangled and crushed by their hideous deity. It 
is not so, nor will it ever be, with the American people. 
They will not worship at a cruel, heartless shrine ; they will 
rather teach their children and their children's children to 
execrate the authors of their misfortunes. * * * 


"Sir, in point of fact there never was the slighest reason 
in justice why the paper circulation of this country should 
have become depreciated. When the legal-tender note was 
first authorized as money, if we had v said it was good money, 
and by our acts convinced the world of our sincerity, it 
would have maintained an equality with the precious metals 
from the beginning. This has been the history of other gov- 
ernments, and it would have been our history, if capital had 
been capable of a single throb of patriotism when it was 
called on to assist in the preservation of the Union. * * * 

" The hard-handed, sun-burnt millions who rise to their 
daily tasks while the morning star is yet in the sky, and toil 
for a subsistence till the evening star appears, are constantly 
lectured on the virtues of economy by the dwellers in palaces, 
by the inmates ot gilded mansions, by the masters of liveried 
attendants, by the lords of millions, by all such as derive their 
incomes and their luxuries from the labor and the priva- 
tions of others. The poor are exhorted to give up luxuries 
which they have not, in order that the rich may add to their 
already great abundance. Go to the homes of those who eat 
their bread in the sweat of their faces, and ascertain if you 
can the extravagances in which they indulge. Do they main- 
tain costly equipages, splendid carriages, and richly capari- 
soned horses ? Are their humble dwellings adorned with 
valuable paintings, or fitted up with expensive furniture ? Do 
you see pier-glasses on their walls and feel velvet carpets be- 
neath your feet on their floors ? Take a seat with them at 
their frugal but hospitable tables. Do you find extravagance 
there ? Where is the solid silverware, the long succession of 
delicate dishes, the various brands of high-priced wines ? 
None of these things are found to tempt the epicurean taste 
of those who, while preaching economy to the industrial 
classes, sit down each day to banquets such as Dives presided 
over while Lazarus lay at his gates begging bread. * * * 
One iorm of slavery has been swept from American soil. 


Another form has followed it, not to last so long, let us hope, 
but equally remorseless and unsparing in its exactions upon 
labor. It is the slavery of debt. It is upheld by the sanc- 
tions of law, but the great question of American statesman- 
ship for the next fifty years or more will be its abolition, with- 
out doing violence to our national honor. Year after year, 
in one form or another, that leading idea will press itself on 
us for solution." 

Mr. Ewing of Ohio, in a recent speech in the 
House upon the same theme, although less graphic 
than Mr. Voorhees, was equally emphatic : 

" It would have been happy for the people if they had consid- 
ered these questions earlier. They would have been saved, 
among other things, the passage of the act of repudiation and 
extortion of 1869, by which the contract on which $1,600,000.- 
ooo of the public debt was made, was changed, to the detri- 
ment of the people and to the advantage of the holders of 
public securities without consideration, to a sum of not less 
than $500,000,000, and they would have been saved that 
stealthy and rascally act for the demonetization of silver and 
the crowning scheme of the money power for the oppression 
of the people, the Resumption law. No greater injury (he 
said) could be inflicted on a people by its government than, 
the reduction of the volume of currency, to which the busi- 
ness and the values of the country were adjusted. To de- 
crease the value of money was to strike at the interest of the 
whole body of the people. * * * , 

"The resumption was a practical confiscation by law of 
$3,500,000,000 of property. Three-fourths of all classes of the 
people of this country were debtors, and it was their hard- 
earned accumulations that were being wrested from them by 
this robber-law. * * * ._ 

" The thing has been pushed just as far as it will bear." 



The preceding extracts are the distant, but by 
no means a faint, echo of the speeches of Couthon, 
Marat, and St. Just, which, by the terrible pictures 
they drew of the wrongs and sufferings of the peo- 
ple of France, inflamed their passions, aroused 
their hate and goaded them on to those fearful, 
excesses and crimes, which make that period stand 
alone in history. The pictures drawn by Mr. 
Bland, Mr. Voorhees, and Mr. Ewing are conceived 
in the same spirit ; are couched in the same in- 
flammatory language ; are as untrue, as far as the 
cause is concerned, and tend to the same terrible 
results as those of their great prototypes of the 
Reign of Terror. They speak with the same con- 
sciousness of power. They sway with the same ease 
the great assembly of the nation. Their first " lit- 
tle experiment " was the gigantic mob, which, in 
1877, with the bludgeon in one hand, and the torch 
in the other, seized so many of our cities; which 
for a long time defied the utmost power of the mu- 
nicipal and State authorities, and which only yielded 
at last to the strong hand of the Federal Govern- 
ment ; but not until vast amounts of property had 
been committed to the flames, and a great number 
of lives sacrificed. This first " little experiment" 
is a feeble note of warning of what is to come,; 
if the future demands of the revolutionists are not 
fully complied with. The next " experiment " is 
to defy the whole power of the Federal Govern- 
ment itself ! We may affect to laugh at such Ian- 


guage ; but no laughing will obliterate the scenes 
of 1877, which for a long time held the nation 
spell-bound with terror. In the mean time, the 
condition of the people has not improved. Their 
sufferings are still as intense as ever. Their indict- 
ment preferred against their oppressors has lost 
none of its force. They are actively organizing in 
support of the New Party, in almost every town 
and village throughout the land. The great par- 
ties into which the country has been divided are 
eagerly enlisting under its banners.* It has al- 

* One illustration will suffice for all. Three years ago the money 
plank, in the platform of the Democratic party of the State of 
Maine, at its annual State Convention, was 

" A sound currency, coin or its equivalent, essential to stabil- 
ity in business and a restoration of prosperity. Steps toward specie 
payments, and no step backward." 

This year a similar State Convention, held June i8th, 1878, re- 
solved that 

" We are opposed to an irredeemable currency, but believe in a 
currency for the government and the people, the laborer and office- 
holder, the pensioner and soldier, the producer and the bondholder. 
We are opposed to the present national banking system, and in 
favor of the gradual substitution of greenbacks for national bank 

We know of no more striking or melancholy illustration of the 
decline in the intellectual and moral tone of the country than that 
afforded by the recent action of the Democracy of that State upon 
the subject of the currency. This party owed its second great re- 
vival to the action of Jackson in crushing the Bank of the United 
States, that he might inaugurate the rejgn of the money of the Con- 
stitution silver and gold. The Democratic Party, and the Hard- 
Money Party, were for a long time synonymous terms. The other 


2 3 I 

ready achieved two great triumphs the Silver bill, 
of which a copy has already been given, and that 
prohibiting the retirement of the government notes, 
passed May. 3ist, 1878, of which the following is a 
copy : 

"Be it enacted, etc., that from and after the passage of this 
act, it shall not be lawful for the Secretary of the Treasury, 
or other officer under him, to cancel or retire any more of 
the United States legal-tender notes ; and when any of said 
notes may be redeemed or be received into the treasury, under 
any law, from any source whatever, and shall belong to the 
United States, they shall not be retired, canceled or destroy- 
ed ; but they shall be reissued, and paid out again, and kept in 
circulation ; provided that nothing herein shall prohibit the 
cancellation and destruction of mutilated notes, and the issue 
of other notes of like denomination in their stead, as now 
provided by law. All other acts, and parts of acts, in con- 
flict herewith, are hereby repealed." 

This latter act, the second great achievement of 
the party, was to be followed by others which would 
have completed the work ; but they fell, in the 
hurry attendant upon the close of the session, 
through a disagreement between the two Houses of 
Congress in matters of detail. Bills having the 
same object were passed in both by immense majori- 
ties. That which passed the Senate is as follows : 

great party was accused of being, and was overthrown as, the Soft- 
Money Party as the party of paper. Now, the Hard-Money Party 
of Maine not only wholly deserts its principles, but goes for a 
money infinitely worse than that of the banks. 


" Be it. enacted, etc., that from and after the passage of this 
act, United States notes shall be receivable the same as coin 
in payment for the four per centum bonds now authorized by 
law to be issued ; and on and after October ist, 1878, said 
notes shall be receivable for duties on imports." 

The House bill was equally broad and compre- 
hensive in its terms. There can be no doubt that 
the present Congress, immediately upon its reas- 
sembling, will pass a bill providing for receiving the 
notes of the government in payment of the customs 
duties. That done, we are on a basis of inconver- 
tible government paper which can neither be con- 
verted into gold, nor contracted ; and in which, from 
the necessities of the case, the revenues must be 
paid, and all indebtedness, both public and private, 
discharged. The most ardent repudiationist must 
be satisfied with such a victory. There is but 
one step farther to increase, as is demanded, the 
amount of the government notes. If such be the 
case, it will be some consolation to know that the 
remedy will presently follow in the speedy repudia- 
tion of the notes themselves. Government notes 
can never become the permanent currency of a 
people. The disasters which follow its use will 
sooner or later compel its abandonment. What 
folly to prolong its disastrous effects by continuing 
its use ! 


SHOULD Congress enact that from the 1st day of 
January, 1880, its notes should be legal tender only 
for the discharge of contracts then existing, and 
not thereafter be received in the payment of rev- 
enues ; and should provide for their immediate 
funding into bonds, payable in fifty years, and 
bearing interest, say at the rate of 4 per cent., a 
moderate amount, with the present abundance of 
money, could be funded. The process would, how- 
ever, proceed only for a short time before the rate 
of interest on loans of them would exceed that on 
the conversion bonds. Funding would then cease. 
The average rate for money would probably exceed 
4 per cent, up to 1880, when the notes would be 
discharged of the legal-tender clause, and would 
lose a portion of their value. Their funding would 
again begin, but would not proceed far before they 
would again command a higher rate of interest, on 
loans of them to parties who had old contracts to 
close up, than that accruing on the bonds. As 
debts presently maturing were paid off, funding 
would again begin, to be checked in the manner 
already described. It would at no time proceed 
at a rapid pace from the uses which the notes 



would have for other purposes than conversion ; it 
would proceed only when money the notes was 
abundant. The process of resumption could not 
cause an injurious contraction, so far at least as 
the debtor classes were concerned. So long as 
there was a demand for the notes, they would remain 
in circulation in full volume. For such contracts 
as were to mature at a distant day, government 
should reissue them in exchange for the conversion 
bonds. Such provision would seldom have to be 
resorted to, as creditor and debtor would in more 
cases compromise their differences, and place their 
contracts on a specie basis. Resumption on such 
a programme would excite no alarm ; it would be 
resumption without the provision of a dollar of 
coin by the government. It would be resumption 
at a single bound, the only resumption that govern- 
ment should ever undertake, by declaring that on 
and after a certain day the notes would be funded, 
as the only provision to be made for them. It 
would be resumption upon a full currency, to de- 
cline in amount only as it ceased to be wanted. It 
could not be attended with any great shock to 
business, as every one would see that there was to 
be no lack of that wherewith to make his pay- 
ments. It could not be oppressive to the debtor 
classes, as that in which they were to pay would 
certainly not be increased in value, and could al- 
ways be had in exchange for bonds which, from 
their low rate of interest, would for a long time be 



likely to rule below the par of gold. The moment 
the proper measures were taken by government, 
every one would prepare for resumption. The 
banks would be compelled to provide coin re- 
serves for all their new engagements, as the notes 
would not serve as reserves for issues made after 
the law went fully into effect. They would retain 
all the interest paid them oft their bonds, and make 
additions thereto from every source within their 
reach. The act of resumption on the part of the 
government would, with the exception of the pro- 
vision of the conversion bonds, be purely negative. 
That on the part of every member of the commu- 
nity would necessarily be positive, requiring for 
success time and freedom from apprehension as to 
the future. It is a work upon which the whole 
people would enter with the greatest alacrity, the 
moment government retired from the field.* 

* The following table shows the exports into and imports from 
the United States for the last five years, reckoned at their value in 

Year ending 











" 1875 

" 1876 

" 1877 

May 31, 1878 (n mos.).. 
Total ... 





The excess of exports of the country over imports, within a lit- 
tle less than five years, have equaled $651,626,000 ! A correspond- 


As the hypothetical would be an effective me- 
thod, attended with the least possible amount of 
injustice, and "creating the least possible amount 
of embarrassment, it is the one that should be 
adopted. So far from creating any alarm, it would 
instantly set every industry in motion, from the 
confidence it would inspire. To-day it is feared 
that should the Secretary attempt, upon partial 
provision, to resume, there would be an immediate 
rush for coin, producing a corresponding contrac- 
tion of the currency. Although the coin drawn 
would be money, it would not immediately take 
the place that had been filled by the notes, nor 
serve presently as reserves for increased issues by 
the banks. Should it be attempted to resume by a 
full provision of $346,000,000, the whole would be 
speedily drawn, to be followed by a shock which 
would involve every interest of the country in a 
common ruin. It is impossible that government 
should resume by payment ; or rather, in view of 
the disasters which would be inevitable, it could 
never be brought to such a step. The Secretary saw 
this; hence his doctrine of "equivalency," in conse- 

irig sum should, by the laws of trade, have been received in specie 
a sum nearly, or quite sufficient, to put the country on a specie 
basis. What an opportunity has been lost to it. The govern- 
ment has, by purchase, accumulated for various purposes about 
$200,000,000 in coin, but hardly anything has been accumulated 
by the banks, or has entered into the channels of trade. Nothing 
of the kind will be done except for purposes of speculation, so long 
as the public can meet their obligations in the government notes. 



quence of which there was to be no. inducement 
to draw the* notes ; and the retention of the legal- 
tender clause, to be resorted to when he was hard 
pressed. Instead of manfully facing the question, 
he only hid his head in the sand. Instead of treat- 
ing money as a subject coming within the range of 
the exact sciences, he deduced its laws from his 
necessities and from his own imagination. Instead 
of heeding the universal testimony of history, he 
assumed the role of creative power. He may have 
picked up something out of the books, but the 
genius of a statesman must transcend the wisdom of 
the books, especially those upon Political Economy, 
which upon the subject of money violate every rule 
of reason, as well as the universal experience of 

* The writer, in a recent work on " Money ; its Laws and His- 
tory," preferred a grave indictment against the Economists, for their 
teachings upon the subject of money. One illustration will serve 
for all. 

" While the State," says Ricardo, " coins money, and charges no 
seigniorage, money will be of the same value as any other piece 
of the same metal of equal weight and fineness ; but if the State 
charges a seigniorage for coinage, the coined piece of money will 
generally exceed the value of the uncoined piece of metal by the 
whole- seigniorage charged, because it will require a greater quan- 
tity of labor, or, which is the same thing, the value of the produce of 
a greater quantity of labor to procure it. 

" White the State alone coins, there can be no limit to this charge 
of seigniorage ; for, by limiting the quantity of coin, it can be 
suited to any conceivable value. 

"It is on this principle that paper money circulates; the whole 


Should the mode of resumption suggested the 
only practicable one be resorted to, the gold now 
in the Treasury will have been collected to good 
purpose. The greater part of it can be used in the 
purchase of bonds, and in this way go into the pos- 
session of the banks. But the retirement of the 
government notes would by no means establish an 

charge for paper money may be considered as seigniorage. Though 
it has no intrinsic value, yet by limiting its quantity, its value in 
exchange is as great as an equal denomination of coin or of bullion 
in that coin. On the same principle, too, namely, by a limitation 
of the quantity, a debased coin would circulate at the value it should 
have if it were of the legal weight and fineness, not at the value of 
the quantity of metal which it actually contained. * * * 

" On these principles it will be seen that it is not necessary that 
paper money should be payable in specie to secure its value ; it is 
only necessary that its quantity should be regulated according to 
the value of the metal which is declared to be its standard. If the 
standard were gold, of a given weight and fineness, paper might be 
increased with every fall in the value of gold, or, which is the same 
thing in its effects, with every rise in the price of goods. * *.* 

"A currency is in its more perfect state when it consists wholly 
of (government) paper money ; but of paper money with an equal 
value with the gold which it professes to represent. The use of paper 
instead of gold substitutes the cheapest in place of the more expen- 
sive modern medium, and enables the country without loss to any 
individual to exchange all the gold which it issues, and for this pur- 
pose, for raw materials, utensils, and food, by the use of which both 
its wealth and enjoyments are increased." * 

The flights of Bland and Voorhees, in reference to the nature and 
laws of money, are not a whit more extravagant than those laid 
down in the preceding extracts, doctrines which are taught as fun- 
damental principles in every college in the country, in which politi- 
cal economy is part of the course, and in which the works of Adam 
Smith, Ricardo, John Stuart Mill, Bowen, in fact of the whole 



adequate monetary system for the country. To 
accomplish this involves a radical change in the 
law creating the national banks. They would not 
be alluded to in this connection, were it not cer- 
t&in that they must occupy a prominent place in 
all discussions upon the reformation of the curren- 
cy. The banks, when they resume, must, unless 
their circulation be greatly reduced, provide coin 
reserves equaling at least $300,000,000. A period 
would soon be reached when government notes 
will no longer serve for such purpose. Govern- 
ment could supply a large amount ; but this will 
cost as much as it would to import it from abroad. 
Where are their means for such a vast accumulation 
of coin ? The capital of a great portion of them is 
locked up in Washington. Upon this they receive 
interest in gold, a very profitable arrangement, 
so long as they remain in suspension. They now 
issue their notes with almost entire impunity. 

class, are used as text-books. What have we to expect from legis- 
lative bodies when our universities, the most distinguished in the 
land as the sources of instruction, teach that which is not only 
wholly repugnant to reason, and which is not sanctioned by a sin- 
gle example in history, but is refuted by all ? That doctrines alike 
opposed to reason and experience should have held undisputed 
sway over the conviction or assent of the race, since teaching began, 
is the most striking example which history has yet afforded of the 
longevity of sophisms when uttered with a great show of learning 
and sanctioned by great names, and of their immunity from attack 
when a hoary antiquity shall have rendered impious all inquiry as to 
their right to rule. 

* Principles of " Political Economy and Taxation," chap, xxv.' 


When they resume, they must have their capital, 
not in Washington, but in hand. A grave charge 
against them at the present time is, that they are 
annually receiving from the government some $20,- 
000,000 in coin, in addition to the profits derived 
from the regular business. There is a certain de- 
gree of force in this charge. There will be none, 
however, when resumption takes place, for they 
'must provide the necessary reserves, or go out of 
business. If they provide them from sources other 
than their bonds, they have as good a right to hold 
these as a part of their investments, as have indi- 
viduals to hold bonds as a part of theirs. The 
great majority of the banks cannot afford to hold 
them as investments. They require their proceeds 
as active capital. These would give the banks all 
they might need, the greater part of which could 
be drawn from abroad. A bank in Minnesota, for 
example, which scraped together $100,000, for the 
purchase of an equal nominal amount of bonds, to 
be deposited as security for $90,000 of notes, would 
upon resumption have nothing but its deposits 
which would always be small in amount to loan. 
Upon resumption, all its liabilities will return to it 
within periods of ninety days. It must hold coin 
reserves in ratio to the whole amount of its liabili- 
ties, notes as well as deposits, or it will forfeit the 
confidence of the public, and subject itself to a run 
which will inevitably drive it out of business. A 
safety-fund system is adapted to only large cities, 



where the loans are chiefly based upon deposits, 
utilized by checks. It never works successfully 
with metropolitan banks having a large circulation, 
for the reason that the securities held for the notes 
are never available in periods of great pressure. The 
Bank of England holds $75,0x30,000 of governments, 
as a part security for its notes. As it cannot sell 
the former in a panic, every great pressure drives 
it into a position in which it has to invoke the aid 
of government to save it from disastrous failure. 

Resumption consequently involves the entire 
reconstruction of the banking system of the coun- 
try. It is a great misfortune that the central gov- 
ernment ever took the banks from the control of 
the States. It was a measure wholly unwise in a 
political as well as in a commercial point of view. 
They can be much better^ looked after by local au- 
thorities, than by those far distant from the places 
where they are situated. This matter, however, 
is referred to here rather by way of suggestion than 

The object of tl\e preceding pages is not so much 
to discuss systems as to show the wide distinction 
between the money of banks of commerce and 
that of government ; and the necessary effect of 
the latter in sapping, alike, the moral, material 
and intellectual welfare of a people using it. Every 
example in history fully sustains the deductions of 
reason. So far, all issues of government money, 


where the amount has been large, have been re- 
pudiated, not from choice, or any deliberate act, but 
from necessity. Our own is tending rapidly to a 
similar catastrophe. Where issued in large amounts, 
no other solution seems to be possible. The dan- 
ger, in our own case, is greatly increased by the al- 
most universal acceptance of the amount in circu- 
lation as good money. With such premise, the 
position of the greenbackers is a perfectly logical 
one ; and it is not strange that the New Party 
should receive a great number of recruits of well- 
meaning men from both of the old political organi- 
zations. Their leaders are actuated by very dif- 
ferent motives ; their object is the repudiation 
alike, of the public and private indebtedness of 
the country. They have the sense to see that the 
object which they have so much at heart will be 
accomplished by a measure which the Secretary 
himself recommends the receiving of government 
notes in payment of all the revenues as effectu- 
ally as by an overt act declaring that the national 
debt should never be paid. Such a step taken, 
there will be but one currency for government and 
people. The inference will not then be a strained 
one, that what is good enough for the government 
and people is good enough for their creditors. Such 
a conclusion, so agreeable. to the condition of the 
country, and apparently so reasonable, is repudia- 


Assignats of France, 161, et seq.; their first issue, 163 ; arguments 
for, 165, 167, 169 ; second issue of, 168 ; third do., 170 ; decline 
in value of, 171 ; effect of upon the nation, 172 ; great specu- 
lations caused by, 173 ; further issues, 174 ; plans for reducing 
their amount, 176 ; their futility, 177 ; the character of the 
notes, 178 ; amount issued to June, 1794, 178 ; penalties for 
refusing to receive them, 179 ; their effect upon the nation, 
179; upon the poor, 180 ; the amount issued, 183 ; amount in 
circulation at their fall, 183 ; their brutalizing effect, 224. 

Balance of trade, 40, 41, 235 (note). 

Bank of England. (See England, Bank of.) 

Bank of France. (See France, Bank of.) 

Bank of United States. (See United States, Bank of.) 

Bank notes, how issued, 3 ; how retired, 4 ; symbols of capital, 5 '', 
nature of, n, 30, 35, 52 ; their use beneficent, 13 ; reduce prices, 
13 ; how maintained at par, 15 ; bank reserves, 66 ; bank dis;- 
counts, 4 ; currency of, 197, 198, 211, 212 ; must resume with 
the government, 210, 211 ; their inability to resume, 239. 

Banking and Currency, Committee on, of the House, 4 2 - 

Banks of the United States, their suspension in 1857, 67. 

Bayard, Senator, 16 ; remarks of, 21, 29, 30, 35, 36. 

Bell, Mr., 42. 

Bezant denomination of Mongol money, 140. 

Bland, Mr., his "little experiment," 225 ; his threat of revolution, 
225 ; would repudiate the public debt, 225, 229. 

Bonds sold under Resumption Act, 44 ; not available as cash to the 
banks, 77. 




Boutwell, Hon. Mr., Secretary of the Treasury, 118. 
Buckner, Mr., 42. 

Certificates of deposit of gold, 37 ; how different from notes, 39, 40. 

Charles II. of England, 96. 

Chase, Mr., Secretary of the Treasury, 184 ; opposes issue of legal- 
tender currency, 184. 

Chittenden, Mr., 42 ; remarks of, 17, 4*2, 45, 97, 107, 112, 114, 118. 

Church estates in France confiscated, 162. 

Cocachin, a Mongol princess, 149. 

Coe, (Jeo. S., offer for purchase of bonds, 48. 

Coin in hands of the people essential to resumption, 213. 

Coinage of the United States, history of, in, et seq. ; ratio of gold 
to silver, 113, 115, 120. 

Committee on Finance of the Senate, 16 ; its conference with the 
Secretary of the Treasury, 16, et seq.; of the House, 42, et seq. 

Communism. (See Greenback Party.) The cause of, 222 ; product 
of bad government, 223 ; remedy for, 223. 

Confederate currency, amount of, 215, 216. 

Continental money of the United States, 108. 

Corwin, Thomas, Secretary of the Treasury, 114, 115. 

Couthon, his influence during the Reign of Terror, 229. 

Crawford, Mr., Secretary of the Treasury, 114. 

Currency. (See Legal-tender currency.) What is a convertible 

and useful currency? 209. 

Deposits of State and National Bank, 197. 

Debt of the United States, 191. 

Discounts of banks, how made, 4. 

Dunham, Mr., speech of, on the act of 1853, JI 7- 

Eames, Mr., 42 ; remarks of, 56. 

England, recoinage in 1696, 79, et seq.; bank of, 67 ; reserves and 

note circulation of, 67 ; condition of, February 28, 1878, 72 ; 

compared to Treasury of United States, 75, 103 ; how controls 

movement of coin, 101 ; coinage laws of, 126. 
Ewing, Mr., 42 ; remarks of, 48, 57, 63, 70, 77, 91, 99, 106 ; his 

incendiary speech in the House, 228, 229. 



Ferry, Senator, 16 ; remarks of, 29, 35, 41. 

Fort, Mr., 42 ; remarks of, 59. 

France, bank circulation of, 16, 29, 35, 41 ; coin in, 212. 

France, sketch of coinage of, 127, et seq.; Assignats of, 161, et seq. 

Germany, sketch of coinage of, 130, et seq.; coin in, 212. 

Gilfillan, Mr., Assistant Secretary of Treasury, statement of, 37. 

Gold, never the basis of currency, 60 ; gold dollar undervalued 
112; metal in, 112; ratio of, to silver, 113; present value of, 
depressed in ratio to greenbacks, 213. 

Gouy advocates issue of Assignats, 166. 

Government money, 9; how issued, 10; always legal tender, 12; 
drives metallic money out of circulation, 12 ; its effect upon 
prices, 12 ; fluctuations in value of, 14 ; injurious effect of, 14 ; 
always at a discount, 31 ; will be drawn as soon as provision is 
made therefor, 33, 50 ; how maintained at par, 34 ; how differ- 
ing from certificates of deposit, 39 ; never money without legal- 
tender clause, 52 ; amount of, on resumption, 55 ; always in 
excess, 57 ; inferior to debased metallic money, 88 ; issuer of, 
never resumes, 93 ; interest not saved by its use, 109 ; what is 
it? 207, 210; never convertible, 210. 

Greenback Party, 217, et seq. ; what it requires of government, 222 ; 
the effect of its principles, 222; a party of communists, 222; 
its rapid growth, 230 ; its success already achieved, 231. 

Hamilton, Alexander, Secretary of the Treasury, in; report of, 

1791, upon the coinage, in. 
Hardenburg, Mr., 42. 
Hart, Mr., 42. 
Hartzell, Mr., 42. 

Hayes, President, vetoes the Silver Bill, 126. 
Hooper, Mr., remarks of, 126. 
Hunter, Senator, on the act of 1853, 116. 

Izzuddin Muzaffar, paper money of, 144. 
Jones, Senator, 16 ; remarks of, 21, 29, 35. 
Kaikhatu Khan, account of paper money of, 144. 

246 INDEX. 

Kelley, Mr., remarks on the coinage, 119. 

Kernan, Senator, 16 ; remarks of, 28, 40, 42. 

Knox, J. J., Comptroller of the Currency, report of, 118. 

Law, John, account of money of, 162. 

Legal tender money of the Mongols, 138, et seq.; of the Ameri- 
can Revolution, 149, el seq. ; decline in price of, 151; tariff 
of prices, 153 ; amount issued, 154 ; effect of, 156 ; continued 
issue of, 157; efforts to sustain its price, 157; its fall, 159; 
its effect, 160; of France, 161, et seq.; second issue of, in 
United States, 184; issue not necessary, 186 ; effect of, 190; 
Congress votes to retire, 192. 

Linderman, Dr., director of the mint, 118. 

Liverpool, Lord, letter of, to the king, 127. 

Locke, John, reply of, to Lowndes, 84. 

Lowndes, proposal of, to debase the coinage, 82. 

Macaulay, Lord, upon the recoinage in 1696, 79, 86. 

McCulloch, Hugh, Secretary of the Treasury, 191 ; recommends re- 
tirement of legal-tender notes, 191. 

Maine, progress of Greenback Party in, 230. 

Mandats of France, account of, 181. 

Marat, a leading character in the French Revolution, 229. 

Maximum laws established in France, 175 ; their effect, 175. 

Ming dynasty, money of, 143, 148. 

Mint of the United States, in. 

Mirabeau advocates the issue of the Assignats, 165. 

Mobs in the United States in 1877, 229 ; the destruction caused by, 

Money, what is paper? I ; of banks, 3, et seq.; of government, 9, et 
seq.; nation rich in ratio to, 208. 

Mongols, legal-tender money of, 138, et seq.; note of the Ming 
dynasty, 148 ; amount of, 141, 143. 

Morrill, Senator, 16; remarks of, 19, 35, 98, 202; his speeches, 
upon legal-tender money, 203, 204, 205, 206, 207. 

National Party, 217. 

INDEX. 247 

Necker, M., opposes issue of Assignats, 162. 
Nobles, estates of, in France confiscated, 174. 
Notes. (See United States notes.) 

Paper money, what is it? i ; amount per head of population, 199 ; 

" evils of excess of, 199. 
Phillips, Mr., 42 ; remarks of, 58. 

Political Economists, teachings of, on the subject of money, 237. 
Polo, Marco, account of the money of the Mongols, 138. 
Poor, how affected by fall in price of silver, 137 ; how affected by 

issue of government money, 220, 221. 
Population, money per head of, 199. 
Public credit, act for maintenance of, 193 ; how defective, 196: 

Railroads, effects of paper money on the construction of, 199. 

Ramsey, Dr., on the Continental currency, 160. 

Repudiation, the fate of legal-tender currencies, 121 ; of the United 
States notes, 242. 

Reserves of banks, 7, 66, 67, 68, 200, 201, 203. 

Resumption of specie payments, 16; provision for, 30; impossible 
upon plan of the Secretary of the Treasury, 32 ; how possible, 
33 ; how to be aided by Congress, 35; how accomplished, 
198 ; necessary provision therefor, 215 ; method, 233. 

Russia, state of currency in, 93. 

Saint Just, a leading character of the French Revolution, 229. 

Sherman, Hon. John, Secretary of the Treasury, 16 ; confer- 
ence with Committee of Finance of the Senate, 16, et seq.; 
oppose'd to repeal of resumption act, 17 ; resumption upon 
a double standard, 20 ; silver bill increased demand for 
bonds, 21 ; silver dollars to circulate at par of gold, 22 ; 
reserves to be held in resumption, 28 ; in favor of legal- 
tender notes, 28 ; banks to take care of themselves, 29 ; 
notes to be received for bonds, 35 ; equality of notes to coin, 
35 ; notes to be received for customs duties, 36 ; equal in 
value to gold certificates, 37 ; how adverse drain of gold 
to be met, 40 ; expansion to follow resumption, 41 ; confer- 
ence with Committee of House on banks, 43, et seq.; what are 

248 INDEX. 

government notes without the legal-tender clause, 53 ; hostility 
to the banks, 54 ; amount of U. S. notes.upon resumption, 55, 56 ; 
resumption to increase the gold in the treasury, 57 ; to diminish 
demand for gold, 58 ; government in banking business, 58; Trea- 
sury of 'the United States stronger than the Bank of England, 70; 
bonds held by national banks to be converted as cash reserves, 
75 ; how silver dollars to be maintained in circulation, 77 ; would 
suspend specie payments in case of a drain of coin, 92 ; diffi- 
culty of sorting bank notes an element of strength, 97 ; method 
of maintaining an equivalency between coin and notes, 99 ; 
example of the Bank of England, 99 ; upon the issue of 
legal-tender notes, 185 ; the plan of resumption, 197, 210. 

Silver Bill, its effect upon resumption, 19, 23 ; veto of, 126. 

Silver dollars cannot be exported, 21 ; how many required to pay 
duties, 40 ; cannot be raised above their bullion value, 49 ;' 
cannot be got into circulation, 89 ; over-valued by the act of 
1791, 113 ; under-valued by the act of 1834, 114 ; coinage of, 
117; demonetized 1873, 124; monetized in 1878, 125; ob- 
ject of, 133. 

Silver, subsidiary coins of, 115 ; effect of fluctuations in value of, 
135, et seq. 

Silver Question, ill, et seq. 

Sinking Fund, the, 45. 

Specie, how drain of to be met, 41. 

Standard of value to agree with that of England, 133. 

Stanwood, Edward, on the coinage laws, 122. 

Sybel, von, account of the Assignats of France, 175-180. 

Tabriz, account of paper money in, 144. 

Talleyrand opposes issue of Assignats, 166. 

Terror, reign of, in France, 230. 

Treasury of the United States. (See United States Treasury.) 

Tuglak, Sultan Mahommed, account of money of, 146 147. 

United States, condition of treasury of, 17 ; in the banking busi- 
ness, 61 ; cannot issue convertible currency, 66 ; condition 
of, April i, 1878, and January-i, 1879, 77; compared with 



Bank of England, 75-103 ; second issue of legal-tender cur- 
rency in, 184, et Seq. 

United States notes not money unless legal tender, 185 ; issue not 
necessary, 185 ; effect of, 189 ; Congress votes to retire 190 ; 
reissue of, 196 ; act providing for redemption of, 196 ; objects 
of the acts of 1866-1868, 197; amount of, 197; compound- 
interest notes, 197, 198 ; increase of notes, 198 ; change of 
public opinion in reference to, 200 ; amount of, outstanding, 
202 ; value of, how determined, 213 ; high price accounted 
for, 213, 214 ; effect of further issue of, 218, 219 ; brutalizing 
effect of, 224, 225 ; act to prevent retirement of, 231 ; danger 
of their repudiation, 232 ; to be funded, 232, 233, 235. 

Veto of Silver Bill by President Hayes, 126. 

Voorhees, Senator, 16 ; remarks of, 21, 28, 35, et seq.; his incen- 
diary speech in the Senate, 226, 227, 229. 

Wallace, Senator, 16. 

Washington, his indifference to popular favor, 24 ; his opinion of 

the Continental currency, 155. 
Webster, Peletiah, upon effect of Continental currency, 160. 

Yates, Mr., 42. 

Yule, Col. Henry, account of legal-tender money of the Mongols, 
138, et seq.